FRONTERA ANNOUNCES THIRD QUARTER 2024 RESULTS
Recorded $16.6 million in Net Income and $26.8 million in Income from Operations
Declared Quarterly Dividend of C$0.0625 Per Share, or $3.9 Million in Aggregate, Payable on or around January 17, 2025
Generated $103.2 Million in Operating EBITDA and $124.1 Million in Cash Provided by Operating Activities
Delivered Average Daily Production of 40,616 Boe/d, Up 2% From the Prior Quarter, Averaged Approximately 42,300 Boe/d of Production in October
Targeting Q4 2024 Average Daily Production above 42,500 Boe/d
Reficar Connection Continues Advancing, Start-Up Expected December 2024
Starting September 1st, 2024, ODL Transportation Tariffs to increase by 7.8%
Generated $26.1 Million Quarterly Adjusted Infrastructure EBITDA $13.1 Million and Segment Income
Completed $30 Million Substantial Issuer Bid, Over 90% of Shareholders Participated
Announces Intention to Commence an Additional Substantial Issuer Bid For Up to $30 million
Intends to Renew NCIB For Another Year
CALGARY, AB, Nov. 6, 2024 /PRNewswire/ - Frontera Energy Corporation (TSX:FEC) ("Frontera" or the "Company") today reported financial and operational results for the third quarter ended September 30, 2024. All financial amounts in this news release are in United States dollars, unless otherwise stated.
Gabriel de Alba, Chairman of the Board of Directors, commented:
"Frontera remains focused on the execution of its strategic goals and priorities across its three business units: Upstream, Infrastructure and Guyana.
The Company's Upstream unit continues to perform according to plan, overcoming unexpected social issues during the year. The Company is gaining momentum with crude production ramping up to an average daily production for October of approximately 42,300 boe/d, and targeting fourth quarter production average daily above 42,500 boe/d.
Together with its financial advisor, Goldman Sachs, the Company continues to advance its strategic alternatives review for its standalone and growing Colombian Infrastructure business. This process is actively ongoing with a virtual data room open and discussions with interested third parties underway. The Company remains particularly excited about the long-term prospects of its port business, Puerto Bahia, and its strong pipeline of catalysts including the Reficar connection as well as the recently announced LPG import project with its JV partner, Gasco.
With respect to its Guyana assets, the Company and its joint venture partner remain committed to the potential development of the Corentyne block as supported by our recent discoveries. While we continue to remain confident about the potential of the Corentyne block, the Company is reviewing all available alternatives to safeguard its interest in the block and Guyana.
Subsequent to the quarter, S&P reaffirmed the Company's credit rating at B with a Stable Outlook, reflecting Frontera's strong credit quality and financial position, underpinned by the Company's low leverage. The Company ended this quarter with total debt of $531.2 million and a healthy cash position (including restricted cash) of $240.3 million.
So far in 2024, Frontera has delivered on its commitment to enhance shareholder returns. Subsequent to the quarter and with significant shareholder take-up, the Company successfully completed on its $30.0 million substantial issuer bid which saw over 90% of the Company's shareholders participate. More importantly, and together with the successful substantial issuer bid, the Company will have returned in excess of $53 million to its shareholders, including $11.7 million of declared and paid quarterly dividends, $3.9 million in declared quarterly dividends and repurchased $7.8 million of its common shares through its normal course issuer bid, for an estimated aggregate yield of 11%.
Consistent with the Company's shareholder value focus and following the strong third quarter results, the Company is pleased to announce its intention to commence a new substantial issuer bid (the "New SIB") to purchase up to $30 million of the Company's outstanding shares. The Company shall continue to consider future investors initiatives, including potential additional dividends, distributions, or bond buybacks, based on the overall results of the businesses, cash flow generation and the Company's strategic goals"
Orlando Cabrales, Chief Executive Officer (CEO), Frontera, commented:
"Frontera recorded another strong quarter generating net income of $16.6 million and delivering Operating EBITDA of $103.2 million in line with our plan, despite lower average Brent prices and certain unexpected events during the quarter. We remain on track to meet our 2024 Production and EBITDA Guidance.
During the quarter, we increased our quarter-over-quarter average daily production by 2% to 40,616 boe/d led by strong performance from the Company's heavy oil assets. Our heavy oil assets performance was supported by successful drilling campaigns in both the CPE-6 and Sabanero blocks, and increased water disposal capacity in the CPE-6 block - where the Company achieved another daily production record reaching 8,810 boe/d. These gains were offset mainly by the effects of the 6-day national truckers strike and blockades.
Light and medium crude oil production increased, driven by increased production in Ecuador and well intervention activity performed during the first half of the year, which helped maintain light and medium crude production levels. Natural gas liquids production during the quarter increased following the completion and start-up of the compression facilities expansion and gas reinjection project at our VIM-1 block. Following the completion of the VIM-1 gas reinjection project, natural gas volumes produced at VIM-1 were reinjected, reducing natural gas production and sales volumes. Exploration activities for the VIM-1 block are expected to resume in early 2025 with the drilling of the Hidra-1 well following delays during 2024 associated to social issues. We continue to see additional activity on our VIM-1 block and remain excited about its prospects.
October 2024's actual average daily production totaled 42,300 boe/d.
We invested approximately $82 million in capital expenditures during the quarter primarily to drill 15 development wells at Quifa, CPE-6 and Sabanero, as well as to improve facilities and flowlines.
Additionally, as part of our continuing drive to simplify our business, Frontera and the ANH mutually agreed to terminate Caguan 5 and Caguan 6 blocks exploration contracts, due to long-standing social and security restriction in the contracted areas, reducing the Company's exploration commitments by $53 million.
In our Infrastructure business, ODL continues to deliver positive operational and financial results, generating $68 million of EBITDA for the quarter, resulting in $12 million in net distributions to Frontera during the quarter (totaling $43 million year-to-date). In Puerto Bahia, construction of the connection to the Reficar refinery is over 60% complete, and we are confident that the connection shall become operational by the end of the year. With respect to our LPG import project, working groups have been assembled and detailed engineering work is underway.
At our SAARA project, we are currently processing approximately 50,000 barrels of water per day, and expect to grow water handling capacity to 250,000 barrels by year-end, boosting heavy crude oil production at the Quifa block.
Subsequent to the quarter, Frontera was recognized by the Great Place to Work Institute for its workplace environment. This recognition is a positive reflection of the entire Frontera team and our ongoing efforts to make Frontera a great place to work."
Third Quarter 2024 Operational and Financial Summary:
Q3 2024
Q2 2024
Q3 2023
Operational Results
Heavy crude oil production (1)
(bbl/d)
25,312
24,839
24,097
Light and medium crude oil production (1)
(bbl/d)
12,794
12,583
13,964
Total crude oil production
(bbl/d)
38,106
37,422
38,061
Conventional natural gas production (1)
(mcf/d)
3,192
4,019
5,250
Natural gas liquids production (1)
(boe/d)
1,950
1,785
1,820
Total production (2)
(boe/d) (3)
40,616
39,912
40,802
Inventory Balance
Colombia
(bbl)
777,158
758,794
812,797
Peru
(bbl)
480,200
480,200
480,200
Ecuador
(bbl)
58,026
80,195
37,421
Total Inventory
(bbl)
1,315,384
1,319,189
1,330,418
Brent price Reference
($/bbl)
78.71
85.03
85.92
Produced crude oil and gas sales (4)
($/boe)
71.11
78.31
80.34
Purchase crude net margin (4)
($/boe)
(3.05)
(2.13)
(1.86)
Oil and gas sales, net of purchases
($/boe)
68.06
76.18
78.48
Premiums paid on oil price risk management contracts (5)
($/boe)
(0.45)
(1.32)
(0.59)
Royalties (5)
($/boe)
(0.91)
(2.01)
(3.76)
Net sales realized price (4)
($/boe)
66.70
72.85
74.13
Production costs (excluding energy cost), net of realized FX hedge impact (4)
($/boe)
(8.88)
(10.79)
(8.82)
Energy costs, net of realized FX hedge impact (4)
($/boe)
(5.11)
(4.74)
(5.04)
Transportation costs, net of realized FX hedge impact (4)
($/boe)
(12.12)
(10.92)
(11.73)
Operating netback per boe (4)
($/boe)
40.59
46.40
48.54
Financial Results
Oil & gas sales, net of purchases (6)
($M)
214,084
218,528
254,805
Premiums paid on oil price risk management contracts
($M)
(1,425)
(3,796)
(1,930)
Royalties
($M)
(2,853)
(5,774)
(12,216)
Net sales (6)
($M)
209,806
208,958
240,659
Net (loss) income (7)
($M)
16,588
(2,846)
32,582
Per share, basic
($)
0.20
(0.03)
0.38
Per share, diluted
($)
0.19
(0.03)
0.37
General and administrative
($M)
12,719
12,928
11,925
Outstanding Common Shares
Number ofshares
84,167,856
84,253,816
85,431,716
Operating EBITDA (6)
($M)
103,184
110,321
137,800
Cash provided by operating activities
($M)
124,058
149,787
153,957
Capital expenditures (6)
($M)
82,411
80,198
74,130
Cash and cash equivalents - unrestricted
($M)
205,572
180,659
189,190
Restricted cash short and long-term (8)
($M)
34,752
34,419
32,048
Total cash (8)
($M)
240,324
215,078
221,238
Total debt and lease liabilities (8)
($M)
531,235
523,994
525,517
Consolidated total indebtedness (Excl. Unrestricted Subsidiaries) (9)
($M)
415,387
426,004
409,853
Net Debt (Excluding Unrestricted Subsidiaries) (9)
($M)
267,043
283,651
271,508
(1) References to heavy crude oil, light and medium crude oil combined, conventional natural gas and natural gas liquids in the above table and elsewhere in the press release refer to the heavy crude oil, light crude oil and medium crude oil combined, conventional natural gas and natural gas liquids, respectively, product types as defined in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.
(2) Represents W.I. production before royalties. Refer to the "Further Disclosures" section on page 37 of the Company's management's discussion and analysis the three months ended September 30, 2024 ("MD&A").
(3) Boe has been expressed using the 5.7 to 1 Mcf/bbl conversion standard required by the Colombian Ministry of Mines & Energy. Refer to the "Further Disclosures - Boe Conversion" section on page 37 of the MD&A.
(4) Non-IFRS ratio (equivalent to a "non-GAAP ratio", as defined in National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure ("NI 52-112"). Refer to the "Non-IFRS and Other Financial Measures'' section on page 23 of the MD&A.
(5) Supplementary financial measure (as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section on page 23 of the MD&A.
(6) Non-IFRS financial measure (equivalent to a "non-GAAP financial measure", as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section on page 23 of the MD&A.
(7) Net (loss) income attributable to equity holders of the Company.
(8) Capital management measure (as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section on page 23 of the MD&A.
(9) "Unrestricted Subsidiaries" include CGX Energy Inc, listed on the TSX Venture Exchange under the trading symbol "OYL", Frontera ODL Holding Corp., including its subsidiary Pipeline Investment Ltd. ("PIL"), Frontera BIC Holding Ltd. and Frontera Bahía Holding Ltd. ("Frontera Bahia"), including Puerto Bahia. On April 11, 2023, Frontera Energy Guyana Holding Ltd. and Frontera Energy Guyana Corp. were designated as unrestricted subsidiaries. Refer to the "Liquidity and Capital Resources" section on page 28 of the MD&A.
Third 2024 Operational and Financial Results:
The Company recorded net income of $16.6 million or $0.20/share in the third quarter of 2024, compared with a net loss of $2.8 million or $0.03/share in the prior quarter and net income of $32.6 million or $0.38/share in the third quarter of 2023. Frontera's third quarter net income included $26.8 million income from operations, $13.4 million from share of income from associates, and $5.8 million related to income from risk management contracts, partially offset by finance expenses of $17.7 million and an income tax expense of $10.5 million (including $3.7 million of deferred income tax expenses).
Production averaged 40,616 boe/d in the third quarter, up 2% compared to 39,912 boe/d in the prior quarter and 40,802 boe/d in the third quarter of 2023.
Q3 2024
Q2 2024
Q3 2023
Heavy crude oil production (bbl/d)
25,312
24,839
24,097
Light and medium crude oil production (bbl/d)
12,794
12,583
13,964
Conventional natural gas production (mcf/d)
3,192
4,019
5,250
Natural gas liquids production(boe/d)
1,950
1,785
1,820
Total production
40,616
39,912
40,802
Heavy oil assets performance was supported by successful drilling campaigns in both the CPE-6 and Sabanero blocks, and increased water disposal capacity in the CPE-6 block - were the Company achieved another daily production record reaching 8,810 bbl/d. Production was offset mainly by the effects of the 6-day national truckers strike and blockades. Actual October 2024's average daily production totaled to approximately 42,300 boe/d.
Light and medium crude oil production increased, driven by increased production in Ecuador and well intervention activity performed during the first half of the year which helped maintain light and medium crude production levels. Natural gas liquids production during the quarter increased following the completion and start-up of the compression facilities expansion and gas reinjection project at our VIM-1 block. Following the completion of the VIM-1 gas reinjection project, natural gas volumes produced at VIM-1 were reinjected reducing natural gas production and sales volumes.
Operating EBITDA was $103.2 million in the third quarter of 2024 compared to $110.3 million in the prior quarter and $137.8 million in the third quarter of 2023. The decrease in operating EBITDA compared to the prior quarter was mainly due to lower realization price and higher transportation costs, net of realized FX partially offset by lower production costs (excluding energy cost) during the quarter.
Cash provided by operating activities was $124.1 million in the third quarter 2024, compared to $149.8 million in the prior quarter and $154.0 million in the third quarter of 2023. During the quarter, the Company received $12.1 million in dividends and return of capital payments from its investment in the Oleoducto de los Llanos Orientales ("ODL") and also invested $82.4 million in capital expenditures.
The Company reported a total cash position of $240.3 million at September 30, 2024, compared to $215.1 million at June 30, 2024 and $221.2 million at September 30, 2023. The Company's total cash position, as of September 30, 2024, includes approximately $90 million in tax refund proceeds associated to the 2023 income tax return.
As at September 30, 2024, the Company had a total crude oil inventory balance of 1,315,384 bbls compared to 1,319,189 bbls at June 30, 2024. As of September 30, 2024, the Company had a total inventory balance in Colombia of 777,158 barrels, including 328,508 crude oil barrels and 448,650 barrels of diluent and others. This compared to 758,794 as of June 30, 2024, and 812,797 barrels as at September 30, 2023.
Capital expenditures were approximately $82.4 million in the third quarter of 2024, compared with $80.2 million in the prior quarter and $74.1 million in the third quarter of 2023. During the third quarter, the Company drilled 15 development wells at its Quifa, CPE-6 and Sabanero blocks.
The Company's net sales realized price was $66.70/boe in the third quarter of 2024, compared to $72.85/boe in the prior quarter and $74.13/boe in the third quarter of 2023. The decrease in the Company's net sales realized price quarter over quarter was mainly driven by lower Brent benchmark oil prices, increase in oil price differentials and higher purchased crude net margin, partially offset by lower royalties paid in cash and lower premiums paid on oil price risk management contracts.
The Company's operating netback was $40.59/boe in the third quarter of 2024, compared with $46.40/boe in the prior quarter and $48.54/boe in the third quarter of 2023. The decrease was a result of lower net sales realized prices, and increase in transportation cost and energy cost, partially offset by a decrease in production costs (excluding energy cost).
Production costs (excluding energy cost), net of realized FX hedge impact, averaged $8.88/boe in the third quarter of 2024, compared with $10.79/boe in the prior quarter and $8.82/boe in the third quarter of 2023. The decrease in production costs was driven by higher production and lower well intervention activities in the Light and Medium assets during the quarter.
Energy costs, net of realized FX hedging impacts, averaged $5.11/boe in the third quarter of ...
