Frontera Energy earns $32.58-million (U.S.) in Q3 2023 $$$$$ Mr. Gabriel de Alba reports
FRONTERA ANNOUNCES THIRD QUARTER 2023 RESULTS
Frontera Energy Corp. today released its financial and operational results for the third quarter ended Sept. 30, 2023. 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's three core businesses continue to deliver solid performance.
"Frontera delivered strong operational and financial results from its upstream onshore business and capital spending returned to normal levels following the completion of Wei-1 operations. As a result, the company increased its total cash position, including restricted cash, to $221-million as of Sept. 30.
"Income from the company's standalone and growing Colombia mid-stream business increased 13 per cent during the quarter and preconstruction activities have begun on the important pipeline connection between Frontera's Puerto Bahia liquids terminal and the Cartagena refinery.
"In parallel with the third party laboratory confirmation of our significant light oil and sweet medium crude discovery at Wei-1, the joint venture, with support from Houlihan Lokey, is reviewing strategic options for its potentially transformational Guyana exploration business, the Corentyne block, including a potential farm down, as it progresses its efforts to maximize value from its investments in Guyana.
"Importantly, during the quarter, the company continued to drive costs out of its business, reducing its G&A by 4 per cent. Building on this positive momentum and to better position the company for sustained long-term success, subsequent to the quarter, Frontera's board of directors approved a restructuring plan that will improve organizational and operational efficiencies, reduce costs, and better align the company's work force with current business needs, top strategic priorities and key growth opportunities.
"Frontera also plans to launch a NCIB to permit purchases of up to 10 per cent of its outstanding float.
"I am excited about the strong performance from Frontera's three core businesses and the tangible steps the company is taking to surface value for shareholders."
Orlando Cabrales, chief executive officer (CEO), Frontera, commented:
"I am pleased with Frontera's third quarter operational and financial results. We increased our operating EBITDA by 18 per cent and our operating netback by 19 per cent quarter over quarter, driven in part by a 16-per-cent increase in our net sales realized price.
"Year to date, our production has averaged 41,477 boe/d. In the third quarter, we increased our heavy oil production by 15 per cent due in part to increased water-handling at SAARA and increased natural gas liquids production by 100 per cent compared to the same quarter last year. At CPE-6, we also delivered record quarterly average production of 5,803 bbl/d, up 13 per cent quarter/quarter through development drilling, new flow lines and expanded facilities. Recently, CPE-6 achieved record daily production of 6,435 bbl/d.
"We achieved record safety results for the nine months ended Sept. 30, as our employees delivered the lowest recordable incident rate (TRIR) in company history. Additionally, the company recycled 41.4 per cent of all water used in our operations, offset 33 per cent of our 2023 Colombian emissions, and preserved 1,367 hectares in the Serrania de Manacacias Park, in Entrerrios as we continue to responsibly meet our corporate and ESG objectives.
"Finally, during the quarter, third party laboratory analysis confirmed the presence of medium sweet crude oil in high-quality Maastrichtian cored reservoir at the Wei-1 well on the Corentyne block, offshore Guyana, confirming the significant potential of this block."
Third quarter operational and financial results:
- The company recorded net income of $32.6-million (38 cents/share) in the third quarter of 2023, compared with net income of $80.2-million (94 cents/share) in the prior quarter and a net loss of $26.9-million ((30 cents)/per share) in the third quarter of 2022. The net income in the third quarter included operating income of $65.0-million, share of income from associates of $13.7-million, a foreign exchange gain of $4.3-million and finance income of $1.9-million, partially offset by finance expenses of $16.4-million, other expenses of $1.2-million and income tax expenses of $15.3-million.
- Production averaged 40,802 boe/d (barrels of oil equivalent per day) (consisting of 24,097 bbl/d (barrels per day) of heavy crude oil, 13,964 bbl/d of light and medium crude oil, 5,250 mcf/d of conventional natural gas and 1,820 boe/d of natural gas liquids) in the third quarter of 2023, down 3 per cent compared with 42,049 boe/d in the prior quarter and 41,033 boe/d in the third quarter of 2022. The decrease in production quarter over quarter was mainly the result of lower light and medium crude oil production in Colombia, driven in part by the relinquishment of the Neiva and Orito blocks (which produced approximately 587 boe/d net to Frontera) to Ecopetrol following the completion of the block's production contract at the end of the second quarter of 2023. The decrease was partially offset by higher heavy oil crude production driven by another record quarterly CPE-6 production of 5,803 bbl/d due to positive development drilling and the reactivation of the Sabanero block on July 1, 2022, and the successful Jandaya-1 well stimulation in Ecuador.
- Operating EBITDA (earnings before interest, taxes, depreciation and amortization) was $137.8-million in the third quarter of 2023, up 18 per cent compared with $116.5-million in the prior quarter and $173.2-million in the third quarter of 2022. The increase in operating EBITDA quarter over quarter was primarily a result of higher Brent oil prices and improved differentials during the quarter, partially offset by higher production and transportation costs.
- As of Sept. 30, 2023, the company had a total inventory balance in Colombia of 812,797 barrels, including 624,535 crude oil barrels and 188,262 barrels of diluent and others. This compared with 881,758 as of June 30, 2023, and 590,984 barrels as at June 30, 2022. The decrease in inventory balance was primarily due to inventory drawn for export sales. Inventory balances in the third quarter related to Ecuador and Peru were 37,421 barrels and 480,200 barrels, respectively.
- Capital expenditures were $74.1-million in the third quarter of 2023, down 52 per cent compared with $154.9-million in the prior quarter as expenditures related to drilling operations at Wei-1 wrapped up and $76.0-million in the third quarter of 2022. During the third quarter, the company drilled 14 development wells at its Quifa, Cajua and CPE-6 blocks, as well as one exploration well, Perico Centro-1 (formerly Jandiayacu-1), on the Perico block in Ecuador. For the nine months ended Sept. 30, 2023, the company has executed $360.4-million in total capital spending, including $156.8-million in total capital spending related to the Wei-1 well.
- Cash provided by operating activities in the third quarter of 2023 was $154.0-million, compared with $183.6-million in the prior quarter and $120.8-million in the third quarter of 2022. Cash generation from operating activities remained strong due to stronger quarter-over-quarter Brent oil prices and $64.2-million in income tax and VAT recoveries.
- The company reported a total cash position of $221.2-million as of Sept. 30, 2023, up 3 per cent compared with $213.8-million as of June 30, 2023, and $309.1-million as of Sept. 30, 2022. Subsequent to the quarter, the company also borrowed $18-million under a new Bancolombia working capital loan facility and immediately repaid in full the outstanding balance of $12-million under the Citibank working capital loan.
- The company's net sales realized price was $74.13/boe in the third quarter of 2023, up 16 per cent, or $10.04/boe, compared with $64.09/boe in the prior quarter and $81.87/boe in the third quarter of 2022 primarily driven by the increase in the benchmark oil price and narrower differentials during the third quarter of 2023.
- Frontera's operating netback was $48.54/boe in the third quarter of 2023, up 19 per cent compared with $40.81/boe in the prior quarter and $59.97/boe in the third quarter of 2022 due to higher net sales realized price partially offset by higher production and transportation costs during the third quarter.
- Production costs, net of realized FX hedge impact, averaged $13.86/boe in the third quarter of 2023, up 12 per cent compared with $12.39/boe in the prior quarter and $11.20/boe in the third quarter of 2022. The increase in production cost on a per-barrel basis in the third quarter compared with the prior quarter is the result of higher energy costs, technical assistance and fuel consumption partially offset by lower well services costs.
- Transportation costs, net of realized FX hedge impact, averaged $11.73/boe in the third quarter of 2023, up 8 per cent compared with $10.89/boe in the prior quarter and $10.70/boe in the third quarter of 2022. The increase in transportation cost quarter over quarter was mainly due to the annual increase in transportation tariffs and exchange rate impacts.
- In the company's Colombia mid-stream business, total Oleoducto de los Llanos Orientales S.A. (ODL) volumes pumped were 251,988 bbl/d during the third quarter of 2023, up 17 per cent versus the third quarter of 2022.
- Puerto Bahia liquid volumes were 53,586 bbl/d during the third quarter down 11 per cent compared with the third quarter of 2022, driven mainly by lower imported crude volumes. Puerto Bahia liquid revenues were $7.8-million during the third quarter, up 1 per cent compared with the third quarter of 2022, mainly due to higher tariffs.
- Adjusted mid-stream EBITDA in the third quarter of 2023 was $29.9-million, compared with $31.1-million in the prior quarter and $17.6-million in the third quarter of 2022.
- In the company's exciting Guyana exploration business, confirmed the discovery of 342 feet (104 metres) feet of total net pay discovered to date on North Corentyne. Results further demonstrate the potential for a stand-alone shallow oil resource development across the Corentyne block.
- Total costs associated for the Wei-1 well are now estimated to be within $185-million to $190-million following the successful implementation of several initiatives. It is anticipated that Frontera's actual direct and indirect WI (working interest) will vary between 72.1 per cent and 72.4 per cent, and 93.3 per cent and 93.4 per cent, respectively. Final WI calculations will be determined in December, 2023, after close out of the Wei-1 well.
- From a shareholder initiatives standpoint, Frontera intends to implement a normal course issuer bid (NCIB) to permit purchase up to 10 per cent of its public float over the next year subject to approval of the Toronto Stock Exchange (TSX).
Frontera's ESG strategy
The company continues to deliver on its ESG goals. In the nine months ended September, 2023, Frontera achieved a total recordable incident rate (TRIR) of 0.49, the best safety performance in company history and below its 2023 TRIR objective of 0.74. During the third quarter Frontera, protected and preserved 1,367 hectares of land in the Serrania de Manacacias Park, Entrerrios. When combined with reforestation plantings and sustainable use projects, the company has exceeded its goal of 1,000 hectares and totalling 5,994 hectares preserved.
As of Sept. 30, 2023, the company has recycled 41.4 per cent of water used in its operation and has offset 33 per cent of its 2023 Colombian emissions through the purchase of carbon credits. Additionally, the company continues to focus on bridging diversity, inclusion and gender equity gaps. During the quarter, Frontera hired six locally trained community women as well operators through its oil and gas technical program called Crece con Frontera.
As of September, 2023, Frontera has invested $2.1-million in 161 social projects, benefiting more than 33,000 people in Colombia, Ecuador and Peru. The company purchased $50.9-million from local suppliers and will accomplish its goal of purchasing $55-million locally in 2023.
Shareholder initiatives
Frontera also announces that the company intends to file with the TSX a notice of intention to commence a normal course issuer bid for its common shares (the NCIB). If accepted by the Toronto Stock Exchange, the company would be permitted under the NCIB to purchase, during a 12-month period, up to 3,872,358 common shares, representing approximately 10 per cent of the company's public float (as calculated in accordance with TSX rules). The NCIB will be made in accordance with the rules of the TSX through the facilities of the TSX or alternative trading systems, if eligible. Frontera believes that, from time to time, the market price of its common shares may not fully reflect the underlying value of its business and future prospects and financial position. In such circumstances, Frontera may purchase for cancellation outstanding common shares, thereby benefitting all shareholders by increasing the underlying value of the remaining common shares. The company remains committed to returning capital to shareholders and continues to consider future shareholder value enhancement initiatives.
Under its normal course issuer bid that expired on March 16, 2023, Frontera was authorized to repurchase for cancellation 4,787,976 common shares and Frontera purchased for cancellation 4,270,100 common shares between March 17, 2022, and March 16, 2023, at a volume weighted average price of $9.04 (Canadian) per share. Purchases were made on the open market.
Third quarter 2023 conference call details
A conference call for investors and analysts will be held on Thursday, Nov. 10, 2023, at 10 a.m. Eastern Time. Participants will include Gabriel de Alba, chairman of the board of directors, Orlando Cabrales, chief executive officer, Rene Burgos, chief financial officer, and other members of the senior management team.
Analysts and investors are invited to participate using the following dial-in numbers:
Participant number (toll-free North America): 1-888-664-6383
Participant number (toll-free Colombia): 01-800-518-4036
Participant number (international): 1-416-764-8650
Conference ID: 52702838
Webcast audio: Frontera website
A replay of the conference call will be available until 11:59 p.m. Eastern Time on Nov. 17, 2023.
Encore toll-free dial-in number: 1-888-390-0541
International dial-in number: 1-416-764-8677
Encore ID: 702838
About Frontera Energy Corp.
Frontera Energy is a Canadian public company involved in the exploration, development, production, transportation, storage and sale of oil and natural gas in South America, including related investments in both upstream and mid-stream facilities. The company has a diversified portfolio of assets with interests in 27 exploration and production blocks in Colombia, Ecuador and Guyana, and pipeline and port facilities in Colombia. Frontera is committed to conducting business safely and in a socially, environmentally and ethically responsible manner.