Aug 2019 News Release regarding paying 10%+ dividendsWhen a company is totally controlled and over 50% owned by 2 Venture Capitalist, it is normal for them to figure out ways to pull as much cash out of these controlled companies as possible to benefit themselves.
I wanted to see what prompted FEC to payout the special dividend that resulted in over 10% in dividends paid out in the first 9 months of 2019. This 2019 news release came out shortly prior to another news release stating they were going to start investing some Capex in Guyana for 3D seismic in the Northern Coretyne Block and from that point on the money started flowing into Guyana by the $100's of millions. And the dividends stopped soonafter.
Regardless of what happens to Frontera Guyana. With little or no FEC money currently flowing into Guyana, the news of starting to pay dividends again seems to be a very good sign. If the Investments bankers can get the dividend rate back up to the 10% range, it allows them to pull a lot of cash out of the company to pay themselves (about 55% of the total dividends paid, based on latest numbers, would go to Catalyst and Gramercy), and also pay us a nice dividend that makes if far far easier to hold this stock. It should also substantially raise the value of the stock and allow them to take their time in trying to find the best offer(s) for all or parts of the company.
AND, if by chance FEC can sell Frontera Guyana for a decent amount of cash but not sell the other two parts of FEC, the fastest way for the Investment bankers through the Catalyst Managing Partner who happens to be the FEC Chair, Gabriel de Alba, to gain quick control of some of that cash is for de Alba to declare FEC pay another special dividend.
It will be interesting to see how the 2023 annual results news coming out late next week, compares to this one as far as the profit and cash flow etc. Hopefully, we see the word "STRONG" in the headline.
NEWS RELEASE FRONTERA ANNOUNCES STRONG SECOND QUARTER 2019 RESULTS
Higher Earnings, Cash Provided by Operating Activities and Record Operating EBITDA Production Growth, Higher Realized Oil Prices, Narrow Crude Differentials, and Cost Savings Initiatives Drive Improved Financial Performance Company Raises 2019 EBITDA Guidance on Strong First Half Results and Declares Regular and Special Dividends
Toronto, Canada, August 1, 2019
- Frontera Energy Corporation (TSX: FEC) (“Frontera” or the “Company”) announces today the release of its Interim Condensed Consolidated Financial Statements for the second quarter of 2019, together with its Management, Discussion and Analysis (“MD&A”). These documents will be posted on the Company's website at www.fronteraenergy.ca and SEDAR at www.sedar.com.
All values in this news release and the Company’s financial disclosures are in United States dollars unless otherwise stated. Outstanding Second Quarter Operational and Financial Results
• Net income of $228 million ($2.32/share) in the second quarter of 2019 compared to net income of $46 million ($0.47/share) in the first quarter of 2019 and a net loss of $184 million ($1.84/share) in the second quarter of 2018, was driven by the recognition of a deferred tax asset of $177 million combined with strong production and realized prices.
• Cash provided by operating activities of $176 million compared to cash provided by operating activities of $72 million in the first quarter of 2019 and cash provided by operating activities of $110 million in the second quarter of 2018. Cash provided by operating activities adjusted for changes in non-cash working capital was $186 million in the second quarter of 2019.
• Operating EBITDA of $181 million was 25% higher than the first quarter of 2019 and 45% higher than the second quarter of 2018. Operating EBITDA in the first half of 2019 was $326 million.
• Production averaged 74,385 boe/d, an increase of 9% compared to the first quarter of 2019 and 3% higher than the second quarter of 2018. Current production is over 68,500 boe/d, following the lifting of the force majeure event on the NorPeruano pipeline which impacted production from Block 192 in Peru
• Operating netback during the second quarter of 2019 was $36.45/boe, 21% higher than in the first quarter of 2019 and 28% higher than in the second quarter of 2019 driven by higher realized prices and lower per unit production costs on higher production volumes.
• Production costs during the second quarter of 2019 of $11.17/boe were 2% lower compared to the first quarter of 2019 and 10% lower than in the second quarter of 2018. The Company is implementing a number of operational cost savings and efficiency improvement initiatives that will lead to a lower cost structure going forward and has also benefited from a weaker Colombian peso during the quarter
• Transportation costs during the second quarter of 2019 of $12.49/boe remain stable as compared to $12.70/boe in the first quarter of 2019 and $11.81/boe during the second quarter of 2018 which benefited from a one-time recovery associated with the P-135 arbitration agreement. 2
• Cash and cash equivalents including restricted cash totaled $486 million as at June 30, 2019, a decrease of $2 million compared to March 31, 2019 reflecting a one-time cash payment of $48 million to settle the Transporte Incorporado put option, $13 million on shareholder returns, including $12 million of dividends paid and $1 million of shares repurchased under the Company's Normal Course Issuer Bid (“NCIB”), and $11 million ECA payment to Puerto Bahia, offset by strong cash provided by operating activities over the period.
• During the second quarter of 2019 the Company executed a letter of credit facility which released $11 million of restricted cash and is currently negotiating an uncommitted master agreement for the issuance of stand by letters of credit in the aggregate maximum amount of $50 million which is expected to release an additional $30 million to $50 million of restricted cash during the remainder of 2019.
• Capital expenditures of $73 million during the second quarter of 2019 were 6% higher than the first quarter of 2019 and 15% lower than the second quarter of 2018 driven by the drilling of 42 wells during the quarter as compared to 31 wells in the prior quarter and 24 wells in the prior year quarter which also included capital allocated to pre-drill activity associated with two higher capital exploration wells that were drilled in the third quarter of 2018
. • General and administrative expenses (“G&A”) of $18 million in the second quarter of 2019 an increase of 10% compared to the first quarter of 2019 reflecting short term incentive payments and planned annual salary increases, while G&A costs were 30% lower compared to the second quarter of 2018 reflecting the continuing benefits of cost savings initiatives implemented in 2018 and 2019. The Company continues to focus on improving operational and efficiency metrics throughout the organization.
• The Company announced a special dividend of C$0.535 to be paid on or about August 23, 2019 to shareholders of record on August 9, 2019, and a regular quarterly dividend of C$0.205 to be paid on or about October 16, 2019 to shareholders of record on October 2, 2019. The Company's policy is to pay a quarterly dividend of approximately $15 million, during quarters in which Brent oil price averages $60/bbl or higher. The declaration and payment of any specific dividend, the actual amount, the declaration date, the record date, and the payment of each quarterly dividend will be subject to the discretion of the Board of Directors. To date in 2019, the Company has paid dividends of $53 million and declared a further $55 million in regular and special dividends, representing a yield of over 10%.
• During the quarter the Company repurchased for cancellation 151,500 shares at a cost of $1 million (C$11.69/share) under its NCIB. Under the NCIB which expired on July 17, 2019, the Company repurchased for cancellation 2.7 million shares at a cost of $28 million (C$13.70/share). Over the past 12 months the Company has allocated $135 million to programs to enhance shareholder returns representing a return of over 13% to equity holders.
• The Company has hedged approximately 44% of second half 2019 production using options strategies with price floors between $55.00/bbl - $60.00/bbl and price ceilings between $75.43/bbl - $76.36/bbl. The Company has also hedged approximately 33% of first half 2020 production using options with price floors between $55.00/bbl - $58.64/bbl and price ceilings of between $74.68/bbl and $75.58/bbl
. Gabriel de Alba, Chairman of the Board of Directors of Frontera, commented: “The Board of Directors approved a special dividend to reflect the strong financial and operational results in the first half of 2019 combined with a strong balance sheet and the generation of cash provided by operating activities in excess of capital expenditures. The special and regular dividend declared of $55 million combined with $53 million paid so far in 2019 represents distributions to shareholders of $108 million, representing a yield of over 10%.”