Frontera Energy Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2024

Key Takeaways

  • Frontera’s oil & gas production rose to an average of 40,616 BOE/d in Q3 and is ramping Q4 volumes to over 42,500 BOE/d, driven by record heavy-oil output at CP6 and strong well performance.
  • The company has launched a strategic‐alternatives review for its standalone infrastructure business, with a virtual data room open and active discussions on assets including the Puerto Vallarta port and LPG import project.
  • In Q3, Frontera reported $16.6 million net income and $103.2 million operating EBITDA; S&P reaffirmed its B-rating with a stable outlook, and the balance sheet closed at $531.2 million of debt and $240.3 million of cash.
  • The company invested $82 million in capital expenditures—drilling 15 development wells across CP6, Sabanero and B1 blocks, expanding water-handling capacity and completing gas reinjection projects—and remains on track for full-year guidance.
  • Frontera remains committed to the Guyana Quijano block following recent discoveries, stating it has met all license obligations and is evaluating “all available alternatives” to safeguard its stake in the project.
AI Generated. May Contain Errors.
Earnings Conference Call
Frontera Energy Q3 2024
00:00 / 00:00

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Operator

Good morning. My name is Ludi, and I'll be your conference facilitator today. Welcome to Frontera Energy's Q3 2024 Operating and Financial Results Conference Call. All lines are currently on mute to prevent any background noise. I would like to remind you that this conference call is being recorded today and is also available through audio webcast on the company's website. Following the speaker's remarks, there will be time for questions. Analysts and investors are reminded that any additional questions can be directed to Frontera following today's call at ir@fronteraenergy.ca. This call contains forward-looking information within the meaning of applicable Canadian securities laws relating to activities, events, or developments the company believes or expects will or may occur in the future. Forward-looking information reflects the current expectations, assumptions, and beliefs of the company based on information currently available to it.

Operator

Although the company believes the assumptions are reasonable, forward-looking information is not a guarantee of future performance. Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the company to differ materially from those discussed in the forward-looking information. The company's MD&A for the quarter ended September 30, 2024, and the company's annual information form dated March 7, 2024, and other documents it files from time to time with securities regulatory authorities describe the risks, uncertainties, material assumptions, and other factors that could influence actual results. Any forward-looking information speaks only as of the date on which it is made, and the company disclaims any intent or obligation to update any forward-looking information except as required by law.

Operator

I would now like to turn the call over to Mr. Gabriel De Alba, Chairman of the Board of Frontera Energy. Mr. De Alba, please go ahead.

Gabriel de Alba
Gabriel de Alba
Chairman of the Board at Frontera Energy

Thank you, Operator. Good morning, everyone, and welcome to Frontera's Q3 2024 Operating and Financial Results Conference Call. Joining me on the call today are Orlando Cabrales, Frontera's CEO, and René Burgos, Frontera's CFO. Also available to answer questions at the end of the call, we have Victor Vega, VP Field Development, Reservoir Management and Exploration; Alejandra Bonilla, General Counsel; Ivan Arevalo, VP Operations; and Renata Campagnaro, VP Marketing, Logistics, and Business Sustainability. Thank you for joining us. Frontera remains focused on the execution of its strategic objectives and priorities, which is upstream infrastructure and Guyana business segment. The company's upstream business continues to perform according to plan, overcoming unforeseen social issues during the year.

Gabriel de Alba
Gabriel de Alba
Chairman of the Board at Frontera Energy

The company is gaining momentum, with crude production ramping up to average over 42,300 barrels per day so far in the Q4, and the company is targeting Q4 average daily production above 42,500 barrels per day. In its standalone and growing infrastructure business, the company continues to advance the strategic alternatives review it launched earlier this year. 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 Puerto Bahía Liquid and Dry Cargo Port facility and its strong pipeline of catalysts, including the Reficar connection, as well as the recently announced LPG import project with its key partner, GASCO. With respect to its Guyana assets, the company and its joint venture partner remain committed to potential development of the Corentyne Block, as supported by the recent discoveries.

Gabriel de Alba
Gabriel de Alba
Chairman of the Board at Frontera Energy

While the company remains confident about the exciting potential of the Corentyne Block, it is reviewing all available alternatives to safeguard its interest in the block and Guyana. Turning briefly to Frontera's financial health, I'm pleased to report that 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 a total debt of $531.2 million and a healthy cash position, including restricted cash of $240.3 million. Frontera's solid financial position has supported the company's ability to deliver significant shareholder returns in 2024. Notably, after the quarter and with significant shareholder takeoff, the company successfully executed on its $30 million SIB, which saw over 90% of the company's shareholders participate.

Gabriel de Alba
Gabriel de Alba
Chairman of the Board at Frontera Energy

Together with the completion of the successful SIB, the company has returned more than $53 million to shareholders in 2024, including $11.7 million in quarterly dividends, $3.9 million in declared quarterly dividends, and $7.8 million to the repurchase of its common shares through the NCIB for an estimated aggregate yield of 10%. In addition to a quarterly dividend, the company announced yesterday its intention to commence a new substantial issuer bid of up to $30 million, pursuant to which the company will offer to purchase, for cancellation, a portion of its common shares at a fixed price per share. The terms of the new SIB, including pricing, shall be communicated in due course, and the company expects that the new SIB will be completed in January 2025.

Gabriel de Alba
Gabriel de Alba
Chairman of the Board at Frontera Energy

Frontera remains committed to unlocking value for its stakeholders, including potential additional dividends, share buyback, distributions, or bond buybacks, which will be based on the company's results, capital generation, and the company's strategic goals. I'd now like to turn the call over to Orlando Cabrales, Frontera CEO, and René Burgos, Frontera CFO, who will share their views on our Q3 results. Orlando.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Thank you, Gabriel. Good morning, everyone, and thank you for joining us for today's call. Frontera delivered another strong quarter, generating $16.6 million in net income and $103.2 million in operating EBITDA, in line with our plan, despite lower average brand prices and certain unexpected events that occurred during the quarter. We remain on track to meet our 2024 production and EBITDA guidance. We increased our quarter-over-quarter average daily production by 2% to 40,616 BOE per day, driven by strong performance from the company's heavy oil assets, as we completed successfully drilling campaigns in both the CPE-6 and Sabanero blocks. An increased water disposal capacity in the CPE-6 block, where the company achieved another daily production record reaching 8,810 barrels per day.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

We increased our light and medium crude oil production, driven by improved performance in Ecuador and well-intervention activity performed during the first half of the year, which helped maintain light and medium crude production levels. We also increased our natural gas liquids production during the quarter with the completion and startup of the compression facility expansion and gas reinjection projects 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. And I am very pleased to report that our Q4 production has averaged 42,300 barrels per day. We invested approximately $82 million in capital expenditures during the quarter, primarily to drill 15 development wells at Quifa, CPE-6, and Sabanero. At Quifa, the company invested in new flowline facilities for new well production and connection for the Sahara Project.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Also invested in the development facilities and increasing water handling capacity at the CPE-6 block. At the VIM-1 block, all pre-drill activities related to civil work for the platform roads were completed for the IRA-1 exploration well. However, exploration drilling activities are expected to resume early next year following delays associated with social issues. Additionally, two new exploration wells were sanctioned for the Cachicamo block, expected to spark in the Q4 of this year. The company is also engaged in pre-seismic and pre-drilling activities related to social and environmental studies in the Llanos 99 and VIM-46 blocks. In Ecuador, in our Perico block, performed two work orders and one well service to increase production during the quarter.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Furthermore, as part of our continuing drive to simplify our business, Frontera and the ANH mutually agreed to terminate COR-15 and COR-16 blocks' exploration contracts due to long-standing social and security restrictions in the contracted areas, reducing the company's exploration commitments by $53 million. In our infrastructure business, ODL continues to deliver strong operational and financial results, generating $68 million of EBITDA for the quarter. Net distributions to Frontera amounted to $12 million during the quarter, totaling $43 million year-to-date. At our Sahara 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. I would now like to turn the call over to René Burgos, Frontera's CFO.

René Burgos
René Burgos
CFO at Frontera Energy

Thank you, Orlando. I'd like to take a moment to highlight a few key financial aspects of our Q3 results. For the Q3, the company recorded a net income of $16.6 million, or $0.20 per share. This quarter net income includes approximately $27 million in income from operations, plus Frontera's shares of income from associates of $13 million from its share of income from ODL, and $6 million in income related to risk management contracts, primarily related to our FX hedging positions. These incomes were offset primarily by roughly $18 million in net finance expenses and approximately $10 million in income tax expenses, including $4 million in deferred income taxes. Operating EBITDA for the quarter was approximately $103 million. Compared to the prior quarter, our EBITDA was affected by lower realization price and higher transportation cost, partially offset by lower production costs during the quarter.

René Burgos
René Burgos
CFO at Frontera Energy

So far this year, Frontera has generated $311 million in operating EBITDA and remains on track to meet its 2024 consolidated operating EBITDA guidance of $400 and 450 million at $80 barrel Brent average price for the year. From a barrel standpoint, I would like to take a moment to share the key indicators related to our realized prices and costs. During the quarter, we saw weighted average Brent sales prices for Frontera of $77.95 and an average Vasconia differential on our export sales of $4.92. For the Q3, the purchase crude net margin was $3.05, higher than the $2.13 for the prior quarter. The quarter-over-quarter variance was the result of higher dilution needs for our heavy oil assets. Taking a closer look at our operating costs, our production, energy, and transportation costs per barrel for the quarter totaled $8.88, $5.11, and $12.12, respectively.

René Burgos
René Burgos
CFO at Frontera Energy

This compares to $10.79, $4.74, and $10.92 in the prior quarter. The decrease in production costs quarter-over-quarter was driven primarily by higher production as well as lower well intervention activities during the quarter. On the energy front, the increase was a result of higher energy use during the quarter due to increased production from our heavy oil assets. On transportation costs, costs increased during the quarter due to trucking and pipeline tariff increases that occurred, as well as higher volumes transported. Our operating net back in the Q3 was $40.59 per BOE, compared with $46.40 per BOE in the prior quarter. The decrease was mainly a result of lower realized prices driven by lower benchmark oil prices, which fell over $6 on a quarter-over-quarter basis, partially offset by lower royalties paid in cash and lower production costs.

Unknown participant is now joining.

René Burgos
René Burgos
CFO at Frontera Energy

The feedback continued to show cash generation in the Q3, with cash flows from operations totaling $124 million, including a $90 million tax refund associated with the company's 2023 income tax return and the receipt of $12 million in dividend and capital payments from ODL. On the infrastructure side, adjusted infrastructure EBITDA in the Q2 of 2024 was $26.2 million, compared with $27.8 million in the prior quarter. The quarter-over-quarter decrease was primarily due to lower liquid volumes, due in part to severe weather conditions and an increase in cost and G&A expenses in ODL due to inflationary pressures on services and wages and taxation. We expect these conditions to improve during the Q4 for both ODL and Puerto Bahía.

René Burgos
René Burgos
CFO at Frontera Energy

ODL volumes transported were 244,000 barrels per day during the Q3, compared to 249,000 in the Q2, mainly due to lower volumes transported from the Llanos 34 block. As of September 30th, 2024, the company reported a total cash position of $240 million, including $206 million in unrestricted cash. Turning now to risk management, our current risk management strategy continues to show how our hedging discipline supports our operations and planning. Frontera uses derivative instruments to manage exposure to all price and FX volatility. On the oil side, the company entered into hedges, successfully securing a 40% hedging ratio until February 2025, protecting against a potential drop in oil prices. For the remainder of 2024, the company has hedged with strike prices between $75 and $78 Brent. For 2025, the company has entered into hedges at $70 Brent for January and February.

René Burgos
René Burgos
CFO at Frontera Energy

Frontera has also entered into foreign exchange rate hedges totaling $220 million, covering 40% of the company's expected peso exposure until the Q3 of 2025, with puts between 4,100 pesos and 4,200 peso rates.

René Burgos
René Burgos
CFO at Frontera Energy

The hedges provide the company with a hedge. All right, we're back. These hedges provide the company with stability and will help mitigate impacts from future fluctuations while allowing the business to deliver on its targets. Finally, I'd like to provide an update on our stakeholder value initiative. Under the current NCIB, which commenced on November 21st, 2023, the company has repurchased approximately 1.6 million common shares, or just over 2% of our total common shares outstanding for cancellation, for approximately $9.5 million as of November 7th. Frontera announced that it would file with the TSX a notice of intention to commence a new SIB once the current one expires. With respect to our quarterly dividend, on October 16th, Frontera paid approximately $3.9 million, or CAD 0.0625 per share, to shareholders.

René Burgos
René Burgos
CFO at Frontera Energy

Together with yesterday's results announcement, the board declared a quarterly dividend of CAD 6.25 per share payable to shareholders of record as of January 3rd, 2025, on or around January 17th 2025. Additionally, the company recently announced the successful completion of its SIB announced in August of this year. The company purchased for cancellation close to 3.4 million common shares for an aggregate consideration of CAD 30 million at a fixed price of CAD 12 per share. The SIB was widely accepted, as shown by over 90% of the company's shareholders participating. Furthermore, Frontera also announced its intention to commence a new substantial issuer bid through which the company will offer to purchase up to CAD 30 million of its common shares for cancellations at a fixed price.

René Burgos
René Burgos
CFO at Frontera Energy

The terms of the new SIB, including price, will be determined in due course, and the company expects that it will be completed in January 2025. The SIB will not be conditional upon any minimum number of shares being tendered and will be subject to conditions customary for a transaction of this nature. The company believes this format is the most efficient means to distribute capital to all of our shareholders and looks forward to launching this process in the next few weeks. I would like to turn the call back now to Orlando.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Thank you, René. Before I wrap up today's call, I would like to highlight that during the quarter, Frontera achieved 73% of its sustainability goals for the year. Frontera made purchases from local suppliers that represent around 11% of its total purchases, exceeding our annual goal of 9%. Additionally, our efforts to maintain close and empathetic relationships with all of our stakeholders, including our employees, were recognized as Frontera received the Great Place to Work award and ranked 17th as one of the best companies to work for in Colombia. Our work plan in favor of cybersecurity has been effective, and we have managed to maintain our rate of material cybersecurity incidents at zero. And finally, we are continuing the strategic review process for our infrastructure business, where a virtual data room is available and discussions with potential third parties are ongoing.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

In addition to unlocked value for Puerto Bahía, where the construction of the connection to the Reficar refinery is over 60% completed, and we are expecting that the connection shall become operational by the end of the year. With respect to the LPG import project, working groups have been assembled, and detailed engineering work is underway. On our Guyana business, as Gabriel said in his remarks, we remain confident about the potential development of the Corentyne Block as supported by our discoveries and are reviewing all available alternatives to safeguard our interest in the block and Guyana. With that, I would like to conclude by saying thank you to Gabriel and René for their comments, and thank you everyone for attending our call. I would now turn the call back to our operator, who will open up for questions.

Operator

Thank you. And ladies and gentlemen, at this time, for those wishing to ask a question, please press star followed by the number one on your telephone keypad. If you would like to invoke your question, please press star followed by the number two. Once again, for anyone who would like to ask a question, please press star one on your telephone keypad. One moment, please, for your first question. And your first question comes from the line of Darja Lema with Bloomberg Intelligence. Please go ahead.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

Hi, good morning, Gabriel, Orlando, and René. Congratulations on a great quarter. I just wanted to ask you, I think the question which is on everyone's mind is, do you have any updates on the Guyana license and what are the alternative solutions you were mentioning you're going to explore? Thank you.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Thank you for the question. As I mentioned, I mean, we remain committed to the potential development of the block, and that belief is supported by the discoveries. We are also confident that we have complied with all the obligations under the petroleum agreement and the exploration license. As I said, we are reviewing different alternatives to protect our interests in the license. I don't have more to say at this point in time. Of course, we will continue consulting these matters with the board.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

Okay, thank you. And do you have any timeline? When can we expect the next updates on Guyana, perhaps?

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

We don't have a timeline at this point in time. No.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

Okay, thank you. And my second question is on production. I saw your production has been accelerating in October compared to already strong production from Q3. Do you see the same trends throughout the Q4 and perhaps early next year?

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Yes, as we said, we are envisioning that the Q4 production would be above 42.5 million barrels. So we are confident, based on the performance of the heavy oil assets and the increase in water handling capacity at CPE-6 and Quifa, as well as the performance of Sabanero. So we are confident for that.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

Thank you. That's all from me now.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Thank you.

Operator

And your next question comes from the line of Christian Ferra with KNG Securities. Please go ahead.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

Hello. Well, thanks for the presentation and for taking the questions. I have four questions. I'd like to go quick. First question is, we're observing higher quality differentials despite lower Brent prices. Are you seeing a normalization by the Q4, or should we expect these high values to continue? That's the first question.

René Burgos
René Burgos
CFO at Frontera Energy

What we've been seeing in the market, I think you're going to see consistency. We do not expect a high variation. Actually, we are quite excited about the heavy crude mix because of current status of geopolitics. So the short term is we will probably continue to see the levels that we're seeing today.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

All right, thank you. My second question is regarding this $90 million tax refund that you got this quarter. Could you provide us some color on the reason behind this and if we should expect any other tax refund for the incoming quarters? Thanks.

René Burgos
René Burgos
CFO at Frontera Energy

That's a good question. So as part of the ongoing process, we file taxes once a year. We file our taxes in early the first quarter, and then subsequently, if we do a refund, that refund is managed during the year. So the payment that we received in July or the Q3 is associated with our 2023 income tax filing. What I will point to is that Frontera has historically carried NOLs within its operation, and you can see a balance of these within our deferred tax asset amounts that we carry in our balance sheet. This year, we successfully were able to recover that amount onto our refund of, as we highlighted. Moving forward, we still remain to have some additional deferred tax assets that we expect to capture next year.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

All right, thank you. My third question is regarding this infrastructure business divestment. I want to know if you could comment a bit more on how the discussions are going and if you have any plans for the use of the proceeds in case you decide to go through with the sale or spin-off. Thanks.

René Burgos
René Burgos
CFO at Frontera Energy

So I would say it's a little premature to talk about results. I think our goal here is to maximize the most value from these assets. And I think both Orlando and Gabriel said it well. We are positioning the company to unlock the most value for all of our investors. So as of today, I think Orlando highlighted that we have engaged counterparties in discussions. We have a virtual data room open, and as soon as we have something to announce, we will announce it to the market and then kind of give them some guidance as to how that would be materialized. That said, and I think we also need to kind of, as our advisories point out, there is no guarantee that a churn may occur. However, we are very excited about the potential value unlocking associated from our infrastructure assets.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

All right, thank you. And my last question is, while we've been seeing heavy share repurchases over the past months, are you planning on increasing your bond repurchases considering the low price so you can lock that profit in your P&L? Thanks.

René Burgos
René Burgos
CFO at Frontera Energy

I think that both Orlando and also Gabriel highlighted that all options are on the table. One of the things that we're visualizing is how do we deploy the cash generated from our business? We do maximize value. We're very excited about the results from the first SIB and even more excited about the results of the second SIB. We have actually bought some bonds in the past. I think today we bought roughly $5 million, and we will continue to, if the market's available, to continue to do some of those purchases. As to guidance going forward, it is certainly something on the radar, so we will need to kind of just stay tuned and see how this develops.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

All right. Thank you so much.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Yep. Thank you.

Operator

Your next question comes from the line of Joaquin Robet with Balanz Capital. Please go ahead.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

Hello. Thank you for your presentation. It was good to see ODL getting the tariff bump, and we wanted to focus on this because we understood that inflation updates on regulated goods tolls have been suspended until Integral Tariff Review.

René Burgos
René Burgos
CFO at Frontera Energy

Sorry, you sound a little muffled. I'm sorry to interrupt you, but I really want to hear your question. Can you perhaps speak a little bit more clearly on the phone? Can you try again?

Joaquin Robet
Corporate Research Analyst at Balanz Capital

Can you hear me a little better?

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

This is better, yes.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

Okay, good. So it was good to see ODL getting the tariff bump, and we wanted to focus on this because we understood that inflation updates on regulated crude tolls have been suspended until interim tariff revisions took place, or at least that was the case for Ocensa. Is that suspension over, or the ODL pipe has a different remuneration scheme? If the latter is the case, was the bump related to an inflation update or an interim tariff review or a contractual change with off-takers?

René Burgos
René Burgos
CFO at Frontera Energy

Look, that's a terrific question, and what I would say is excited to hear questions about our very exciting infrastructure assets in these calls. The tariff adjustment is a recognition from the government there that there have been no adjustments as ordinarily scheduled. Ordinarily, the review should have happened two years ago. It didn't happen. The government currently is reviewing the framework under which some of these tariffs are adjusted, and at the request of the pipeline operators, it granted this adjustment, which, by the way, doesn't cover the full pass-through of inflation, but rather a portion of the inflation that we've seen over the past couple of years as an interim step while the full process continues to be vetted by all the stakeholders, this being consumers of pipeline, pipeline operators, and the government. To answer your question, no, there is no completed tariff adjustment.

René Burgos
René Burgos
CFO at Frontera Energy

It's ongoing. Yes, the tariffs were adjusted for both Ocensa and ODL. ODL starts on September, and Ocensa starts in January. And we continue to keep an eye as to how this develops. And I would say, look, this is very positive for our pipeline business, but not so positive for our own business. So there's a balance here. But again, we're excited to receive this question, and thank you very much for it. Hopefully, that clarifies your doubt.

Joaquin Robet
Corporate Research Analyst at Balanz Capital

Yes, thank you.

Operator

Your next question comes from the line of Juan Berrios with Pictet. Please go ahead. Juan Berrios, you might be on mute.

Juan Berríos
Head of Latin America Credit Research at Pictet

Yeah, do you hear me? Is it better now? Is it better? Hello?

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Yes, we can.

Juan Berríos
Head of Latin America Credit Research at Pictet

Yes.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

We can hear you.

Juan Berríos
Head of Latin America Credit Research at Pictet

Yes, perfect. Thank you very much. Congrats for the results. I know that you have said that you're not sharing some information, but maybe we ask on a different way, and if you cannot, it's fine, but regarding the M&A process of the pipeline, is it anything that you can share regarding number of people in the data room? Is the data room still open for potential new buyers or any timing of it? Anything you can share on that? That's the first question, and then the second question is regarding Puerto Bahía. I know that Puerto Bahía has a little bit more than $100 million linked to that port. Just confirming that any potential divestment would be together with that debt, right, and then I have a final question about maybe those together, if you can.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Let me take the first one, and then I can take the second one. As I said, and Gabriel said it as well, the BDR is open. We are having active participation from different interested parties. Discussions are ongoing. Nothing more that we can report at this point in time, but that is the indication that we are hearing today.

René Burgos
René Burgos
CFO at Frontera Energy

Okay. And Juan, on your second question about the debt, so just to clarify, the company has roughly $110 million of debt today. That debt sits at our infrastructure holding company called Pipeline Investment Limited, which is the owner of our ODL shares. And it's also part owner of our interest in Puerto Bahía because we hold Puerto Bahía through different vehicles. Our 99.97% interest. Depending on the outcome of a transaction, that debt could certainly be fully repaid, but it would be outcome dependent. Does that clarify your question?

Juan Berríos
Head of Latin America Credit Research at Pictet

Yes. Yes. Okay. But maybe just to be sure, so there's no chance that if you sell it, that debt remains at Frontera at the holding together with the.

René Burgos
René Burgos
CFO at Frontera Energy

Again, that is not a Frontera. That is not a Frontera. That is not guaranteed by Frontera. So Frontera acts as a sponsor in this transaction, but that's a debtor or guarantor. Depending on the outcome of the transaction, there could be a piece of debt that remains, but it is outcome dependent. It will ultimately depend on the transaction that the board chooses and we decide to move forward on.

Juan Berríos
Head of Latin America Credit Research at Pictet

All right. Perfect. And the last question is regarding 2025. Are you sharing any sort of, I don't know, soft guidance or indication about CapEx for next year and volumes?

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Not at this point in time. We are working on that so we will do it in the near future.

Juan Berríos
Head of Latin America Credit Research at Pictet

Okay. And you cannot share if it will be lower or same or above the current level, right?

René Burgos
René Burgos
CFO at Frontera Energy

Okay. I think the one thing that we already shared is how we're looking to end the year so we can point to where our production is. And I think that the other thing that I would add is that under Orlando and the board's leadership, our goal is on sustainable and cash flow over volume. So you should see more of the same. But again, we're finalizing numbers and having the discussions internally. And as soon as those are available, we will look to kind of share that with the rest of the world.

Juan Berríos
Head of Latin America Credit Research at Pictet

Okay. All right. I was referring in particular about CapEx, sorry, but that's okay. Okay. Thank you very much.

René Burgos
René Burgos
CFO at Frontera Energy

Thank you, Juan.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Thank you.

Operator

And your next question comes from the line of Diego Espinoza with BTG Pactual. Please go ahead.

Diego Espinoza
AM Fixed Income Associate Director at BTG Pactual

Hi. Thank you for taking my questions. Can you hear me?

René Burgos
René Burgos
CFO at Frontera Energy

Yes, sir.

Diego Espinoza
AM Fixed Income Associate Director at BTG Pactual

Perfect.

René Burgos
René Burgos
CFO at Frontera Energy

Yeah.

Diego Espinoza
AM Fixed Income Associate Director at BTG Pactual

Just have a couple of questions. Most of the questions have been already answered, but just if you can give us some color of how much on share buybacks you already done so far this year, how much do you expect in million dollars, just to understand the amount related to cash flow, you expect to do during the Q4 and the first quarter of 2025? If you can give me some color on that just to understand?

René Burgos
René Burgos
CFO at Frontera Energy

Terrific question. So far this year, we've completed through the NCIB, and this is going to include some data from last year, right, because we launched it in November, but we've done 1.6 million shares of our NCIB, roughly costing us a little bit under $10 million. In addition to that, we did the SIB that we completed in August, so we bought 3.4 million shares. That's a total of five million shares, and we bought those shares for, again, $30 million, so a total of $40 million, and now we just announced today our intention to launch an additional SIB. We haven't arrived at a price for that SIB, only an amount or a volume. We expect this to be widely accepted just like the other one was, but that will be for an additional $30 million for a total of close to $70 million.

René Burgos
René Burgos
CFO at Frontera Energy

And that's what's going to get us through at least January of 2025.

Diego Espinoza
AM Fixed Income Associate Director at BTG Pactual

Perfect. So $30 million, we should expect additional cash flow that will be used to share buybacks until January 2025. Okay. And then the next question is regarding potential additional dividends. I know that you have $240 million in cash right now. It's a substantial amount. So can you give some color on the use of that cash or?

René Burgos
René Burgos
CFO at Frontera Energy

Look, so two things. We will continue with our quarterly dividend, obviously subject to our board's decision. And the other thing is, as I said in my notes, the SIB is an efficient way for us to distribute capital to all of our shareholders. And that's why when we think about the level of participation of, I think it was 92% of all of our shareholders participated in our SIB. So we're using both dividends and SIB as a means to return this capital to our shareholders in a way that we believe is most efficient. But again, to answer your question, we believe that we will continue with our quarterly dividends, subject to any other decision that may be determined by our board.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

I think that I mean, the message from René, Gabriel, and myself have been. I mean, clear in terms that based on the company's results, the cash flow generation, and the strategic goals of the company, we will continue exploring the returns to our investors in share buybacks, dividends, and bond buybacks.

Diego Espinoza
AM Fixed Income Associate Director at BTG Pactual

Okay. Perfect. And the last question is, when I look at your cash flow generation, I saw that around $60 million in working capital pressures consumption there. Can you give you some color about that? If it would be transitory, where is related that?

René Burgos
René Burgos
CFO at Frontera Energy

$60 million. I mean, we can take this one offline, and I can look into it off the top of my head. Give me one second.

Diego Espinoza
AM Fixed Income Associate Director at BTG Pactual

Okay. Perfect. That's it. Thank you for taking my questions.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

No, we can take it. Yes. Thank you.

Operator

And once again, if you would like to ask a question, please press the star one on your telephone keypad. Your next question comes from the line of Juan Cruz with Morgan Stanley. Please go ahead.

Juan Cruz
Juan Cruz
Director of Emerging Markets Debt at Morgan Stanley

Good morning, Team Frontera. Congrats on the results. Two questions. First one, with regards to the infrastructure asset sale, can you let us know if you're working with one potential buyer or is it multiple potential acquirers as number one? And number two, with regards to the bonds that you have purchased and intend to purchase going forward, is the intention to keep those bonds outstanding, or do you want to cancel them? That's it.

René Burgos
René Burgos
CFO at Frontera Energy

Can you repeat the question, the second one, please?

Juan Cruz
Juan Cruz
Director of Emerging Markets Debt at Morgan Stanley

Yeah. The second question is with regards to the bonds that you have purchased in the market and that you intend to purchase in the future. Are you intending to keep those bonds outstanding, or do you intend to cancel them?

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

Okay. On the first one, and you can take the second one. I mean, it is a competitive process. So it is a competitive process just to address your first question.

René Burgos
René Burgos
CFO at Frontera Energy

On the.

Juan Cruz
Juan Cruz
Director of Emerging Markets Debt at Morgan Stanley

Does that mean that there's more than one potential interested party? Competitive means more than one. That's what I would assume.

René Burgos
René Burgos
CFO at Frontera Energy

If you want me to get Juan if there I can see a dictionary, I can look up what's the dictionary. Competitive definitely means more than one.

Juan Cruz
Juan Cruz
Director of Emerging Markets Debt at Morgan Stanley

It could be a competition of one. You won by being the only one.

Orlando Cabrales
Orlando Cabrales
CEO at Frontera Energy

This is no competition. This is no competition.

Juan Cruz
Juan Cruz
Director of Emerging Markets Debt at Morgan Stanley

Right.

René Burgos
René Burgos
CFO at Frontera Energy

On your other question, look, no. Bonds that we repurchase, the intention is for those to be canceled.

Juan Cruz
Juan Cruz
Director of Emerging Markets Debt at Morgan Stanley

You intend to cancel them. Okay. Cool. Excellent. Thank you.

Operator

Thank you. And once again, if you would like to ask a question, please press star one. Your next question comes from the line of Joe Di Donado with CGX. Please go ahead.

Analyst at CGX

Hi. This question is for Gabriel. I think the whole issue with CGX. I think shareholders have been extremely patient, waiting well over a year for any kind of information regarding what's going on. I don't seem to understand why everything has to be so cryptic and so secretive. I have been invested with CGX since the year 2000. We're going on 25 years soon. And I'm looking for a bit more information than we are working to try to unlock potential. We had two excellent discoveries that were flubbed in a lot of people's opinions in terms of delivery of information to the public. Enough is enough. You need to explain yourself a little bit better today, please.

Gabriel de Alba
Gabriel de Alba
Chairman of the Board at Frontera Energy

Joe, thank you very much for the question. I think this is not the channel for that question. This is a channel for you guys to actually go chat with the team at CGX. But look, understood, listened, and thank you for your question.

Analyst at CGX

Gabriel runs or is a board of director on CGX, and Frontera is a major shareholder of CGX. I don't understand why the secrecy.

René Burgos
René Burgos
CFO at Frontera Energy

Look, Joe, there's no secrecy. We cannot speak on behalf of CGX. So again, I'll point you to questions about CGX and the shareholders. I'll point them to CGX.

Analyst at CGX

Thank you.

René Burgos
René Burgos
CFO at Frontera Energy

Thank you.

Operator

Thank you, presenters, and there are no further questions at this time. Should you have any further questions, please email ir@fronteraenergy.ca. This concludes the call. Thank you all for participating. You may now disconnect.

Executives
    • Gabriel de Alba
      Gabriel de Alba
      Chairman of the Board
    • Orlando Cabrales
      Orlando Cabrales
      CEO
    • René Burgos
      René Burgos
      CFO
Analysts
    • Diego Espinoza
      AM Fixed Income Associate Director at BTG Pactual
    • Joaquin Robet
      Corporate Research Analyst at Balanz Capital
    • Juan Berríos
      Head of Latin America Credit Research at Pictet
    • Juan Cruz
      Director of Emerging Markets Debt at Morgan Stanley
    • Analyst at CGX
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