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    Unassociated Document

    VIA
EDGAR

    February
19, 2010

    Mr. Karl
Hiller

    Branch
Chief

    Securities
and Exchange Commission

    100 F
Street, N.E.

    Washington,
D.C. 20549-3628

              Re:

              Gran Tierra Energy
      Inc.

                Form
      10-K for the Fiscal Year Ended December 31, 2008

                Filed
      February 27, 2009

                File
      No. 001-34018

    Dear Mr.
Hiller:

    On behalf
of Gran Tierra Energy Inc. (“Gran Tierra” or the “Company”) we are responding to
the comments received from the staff (the “Staff”) of the Securities and
Exchange Commission (the “Commission”) by letter dated February 12, 2010 with
respect to Gran Tierra’s Form 10-K listed above (the “Comment”).  The
Comment has been replicated in italics below for the Staff’s
convenience.

    Form 10-K for the Fiscal
Year Ended December 31, 2008

    Financial
Statements

    Note 6 – Share Capital, page
98

    1.           We
note your response to prior comments 1 and 2, regarding your valuation of the
warrant modifications, and after considering the specific facts and
circumstances surrounding the satisfaction of your liquidated damage liability
with the participating shareholders, we believe that you will need to correct
your valuation of the warrant modifications to use assumptions that are
consistent with those underlying your valuation of other stock-based
compensation.

    However,
we will not object if you wish to rely upon the guidance of footnote 1 of APB 26
in characterizing that portion of the liability derecognized in excess of the
fair value of the warrant modification as a contribution of capital, although
under this scenario that activity in your statements of stockholders’ equity and
the information in your financial statement disclosures will need to be
consistent with this conclusion.

    We
understand that you do not believe these changes would be sufficiently material
to require an amendment to your Form 10-K for the fiscal year ended December 31,
2008. Therefore, in your Form 10-K for the fiscal year ended December 31, 2009,
you should revise your statements of stockholders’ equity to record the $4.3
million difference between the fair value of the liability and the fair value of
the warrant modifications that you calculated to additional paid in capital
rather than to warrants, and you should disclose the reasons for this adjustment
and details about correcting your valuation.

      300, 611-10th Avenue SW, Calgary, Alberta,
Canada          (403) 265-3221
Fax (403)
265-3242          www.grantierra.com

    - 2 -

    Your
revised disclosure should explain why you believe the excess is appropriately
characterized as a capital contribution from the investors, and it should
describe how you determined the fair value of the warrants before and after the
modifications, including reference to the underlying inputs used in your
Black-Scholes calculations. Please submit all of the revisions that you propose
to address the various points.

    Gran Tierra’s
Response

    Gran
Tierra acknowledges the Staff’s guidance and proposes the following disclosure
to be included in our Form 10-K for the fiscal year ended December 31, 2009 Note
6 – Share Capital:

    Registration Rights Payments -
Restatement

    In June, 2006, the Company sold an
aggregate of 50 million units of its securities at a price of $1.50 per unit in
a private offering for gross proceeds of $75 million, pursuant to three separate
Securities Purchase Agreements, dated June 20, 2006, and one Securities Purchase
Agreement, dated June 30, 2006 (collectively, the “2006
Offering”).  Each unit comprised one share of Gran Tierra’s common
stock and one warrant to purchase one-half of a share of Gran Tierra’s common
stock at an exercise price of $1.75 with a term of five years.  As a
result of the 2006 Offering, 50 million shares of Gran Tierra’s common stock
were issued.  In connection with the issuance of these securities,
Gran Tierra entered into four separate Registration Rights Agreements with the
investors pursuant to which Gran Tierra agreed to file a registration statement
with the SEC permitting the public resale of the shares and warrants (and shares
issuable upon exercise of the warrants) issued to the investors in the 2006
Offering by November 17, 2007 and failure to do so would result in liquidated
damages.  The registration statement filed by Gran Tierra with the SEC
to satisfy its obligations under the Registration Rights Agreements was declared
effective by the SEC on May 14, 2007.  As of that date, Gran Tierra
had accrued $8.6 million in liquidated damages under the Registration Rights
Agreements. The $8.6 million of liquidated damages
was recorded as an expense in the consolidated statement of operations in the
amounts of $7.4 million for the year ended December 31, 2007, and $1.3 million
in the fourth quarter of 2006, with a corresponding liability recorded on the
consolidated balance sheet.

    On June 27, 2007, pursuant to the terms
of the Registration Rights Agreements, the Company obtained a sufficient number
of consents from the signatories to the Registration Rights Agreements waiving
Gran Tierra’s obligation to pay in cash the accrued liquidated
damages.  In exchange for amending the Registration Rights Agreements
whereby the holders waived their rights to a cash payment, the Company agreed to
amend the terms of the warrants issued in the 2006 Offering by reducing the
exercise price of the warrants to $1.05 and extending the life of the warrants
by one year.  The revised fair value of the warrants was determined by
Gran Tierra using a Black-Scholes option pricing model using inputs similar to
those used for the Company’s stock based compensation awards except that,
instead of an historical volatility rate, Gran Tierra used a 25% volatility rate, which Gran Tierra
believed at the time reflected a typical volatility rate used to value this type
of financial instrument, and resulted in the fair value of the modified warrants
being equivalent to the amount of the liquidated damages ultimately waived by
the parties to the Registration Rights Agreements.  As a result, $8.6
million was credited to warrants on the consolidated balance
sheet.

    -
3 -

    The Company had previously reported this
fair value of the modified warrants in its audited financial statements for the
fiscal years ended December 31, 2007 and December 31, 2008 and its unaudited
financial statements for the quarters ended March 31, 2009, June 30, 2009, and
September 30, 2009.

    In the fourth quarter of 2009, the
Company determined that the previously disclosed basis for determining the
valuation of the warrant modification was inconsistent with the inputs used in
the Black-Scholes option pricing model to determine the fair value of the
Company’s stock based compensation awards.  As a result, Gran Tierra
determined in 2009 to change its methodology which resulted in the fair value of
the Company’s modified warrants (using the Black-Scholes option pricing model
utilized by the Company for its stock based compensation awards) equaling $4.2 million (rather
than $8.6 million).  As a result, $4.4 million (the excess of the
liquidated damages settled over the fair value of the amendment to the
warrants) has been restated as a decrease in warrants with a corresponding
increase in additional paid-in capital as at June 27, 2007.  The
Company has recorded this excess as an equity transaction as it relates to the
extinguishment of debt with a related party since the parties to the
Registration Rights Agreements comprised over 50 percent of the outstanding
shareholdings of the Company at the time of the transaction involving the
amendment of the Registration Rights Agreements (which agreements provided that
amendments to the Registrations Rights Agreements would be decided by a majority
of the then outstanding registrable shares, as defined in the
agreements).

    The inputs used in the Black-Scholes
option pricing model to determine the change in the fair value of the modified
warrants contemplated by the amendment to the Registration Rights Agreements are
as follows:

              Immediately Before
      Modification

              Immediately Subsequent to
      Modification

              Common share price (closing price
      June 26, 2007)

            $
            1.33

            $
            1.33

              Exercise
    price

            $
            1.75

            $
            1.05

              Dividend yield (per
      share)

              $

            nil

              $

            nil

              Volatility

            100
            %

            100
            %

              Risk-free interest
      rate

            4.69
            %

            4.67
            %

              Expected
    term

              4 years

              5 years

              Estimated forfeiture percentage
      (per year)

            0
            %

            0
            %

    - 4 -

    Additionally, the Statement of
Shareholders Equity included in our Form 10-K for the year ended December 31,
2009 will include the following reference “ Restated – Note 6” beside the
relevant restated financial statement line item amounts.

    * * *
*

    In
addition, Gran Tierra Energy Inc. acknowledges:

              ·

              Gran
      Tierra is responsible for the adequacy and accuracy of the disclosure in
      the filing;

              ·

              Staff
      comments or changes to disclosure in response to Staff comments do not
      foreclose the Commission from taking any action with respect to the
      filing; and

              ·

              Gran
      Tierra may not assert Staff comments as a defense in any proceeding
      initiated by the Commission or any person under the federal securities
      laws of the United States.

    Please do
not hesitate to call me at (403) 265-3221, ext. 230, if you have any questions
or would like any additional information regarding this matter.

    Sincerely,

    Gran
Tierra Energy Inc.

    By:
/s/ Martin
Eden

    Martin
Eden

    Chief
Financial Officer

    cc:      Dana
Coffield – Chief Executive Officer and President

    Nancy H.
Wojtas, Esq.