Frontera Energy Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2024

There are 9 speakers on the call.

Operator

is Joanna, and I

Speaker 1

will be your conference facilitator today. Welcome to Frontera Energy's Second Quarter 20 24 today and is also available through audio webcast on the company's website. Following the speakers' 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 irfronteraenergy. Ca.

Speaker 1

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, assumption and belief of the company based on information currently available to it. 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 and A for the quarter ended June 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.

Speaker 1

Any forward looking information speaks only as of the date on which it is and the company disclaims any intent or obligation to update any forward looking information except as required by law. I would now like to turn the call over to Mr. Gabriel De Alba, Chairman of the Board of Frontera Energy. Mr. De Alba?

Speaker 1

Mr. Dova, you may begin.

Speaker 2

Thank you, operator. Good morning, everyone, and welcome to Frontera's Second Quarter 2024 Earnings Call. Joining me on today's call are Orlando Tavares, Frontera's CEO Rene Bulgos, Frontera's CFO Also joining us today and 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 Arevano, VP of

Speaker 3

Operations and

Speaker 2

Reynaldo Campanaro, VP of Marketing, Logistics and Business Sustainability. Thank you for joining us. Frontera continues to execute on its strategic priorities in support of long term growth and the sustainability of its business. During the quarter, Frontera and Ecopetrol enter into a 2 year contract to treat and dispose water from the Quifa block at Frontera's Sara reverse osmosis water treatment facility. This agreement is set to increase crude oil production capacity at the Quifa block.

Speaker 2

By the end of 2024, Frontera aims to increase processing capacity at Sarah to 250,000 barrels per day. Every 100,000 barrels of water treated at Sarah is expected to translate in 1,000 barrels of production net to Frontera. Subsequent to the end of the quarter, Frontera broke ground on the construction of the bidirectional hydrocarbon flow line connection between Puerto Vallarta Liquids Terminal and Refineria de Cartagena, Reficar. The company expects the connection will drive significant volumes and shall become operational by year end 2024. Frontera also announced that it executed an agreement with Gasco, a leading Latin American energy provider that will see the companies develop the lowest cost liquefied petroleum gas, also known as LPG, import facilities for Colombia at Puerto Bahia.

Speaker 2

As part of the agreement, Puerto Bahia and Gasco will establish a joint venture to develop, construct and operate a 20,400 ton LPG Refrigerated Storage Facility at Puerto Bahia's 4 terminal in Cartagena. The project is expected to cost between $50,000,000 $60,000,000 which will be shared between Puerto Vallarta and Gasco. Puerto Vallarta's contributions are expected to be largely in kind. The collaboration is a significant step forward in meeting Colombia's growing energy needs and demonstrates Puerto Valles and Gasco's commitment to investing in the country's energy infrastructure. These are concrete actions Frontera is taking to create value.

Speaker 2

Today, Frontera's Board declared a quarterly dividend of CAD0.625 per share. Year to date, the company has declared CAD11,700,000 in dividends. In addition to our quarterly dividend, the company announced its intention to commence a substantial issuer bid of $30,000,000 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 SIB, including pricing, shall be communicated in due course and the company expects that the SIB will be completed in October 2024. Under the company's current NCIB, the company has purchased $6,600,000 year to date.

Speaker 2

The company has also bought back $3,500,000 of its 2028 unsecured notes. In total, the company is poised to return so far $51,000,000 of capital to our stockholders. Frontera shall also continue to take actions to unlock value for its stakeholders and remains committed to these efforts for the remaining of 2024 and beyond, including potential additional dividends, share buybacks, distributions, or bond buybacks based on the company's results, cash flow generation and the company's strategic goals, including our ongoing pursuit of a strategic alternatives for interest in the quarantine block in Guyana and our growing Colombian infrastructure business. I'd like now to turn the call over to Orlando Cabrales, Frontera's CEO and Rene Burgos, Frontera's CFO, who will share their views on our Q2 results. Orlando?

Speaker 4

Thank you, Gabriel. Good morning, everyone, and thank you for joining us for today's call. Frontera's demonstrated solid second quarter and half year twenty twenty four results. Production increased approximately 5% on a quarter over quarter basis to 39,900 and 12 barrels per day. Production for June July was on average 40,600 barrels per day.

Speaker 4

During the quarter, our heavy crude oil production grew 6% on a quarter over quarter basis, reaching approximately 24,800 barrels per day. The increase in heavy production was mainly driven by increased water disposal capacity from a new injector well in the Keepa block, the start up of the Sahara plant during the month of May, which is currently processing approximately 50,000 barrels of water per day. Increased water handling capacity in CP6, where we are handling approximately 300,000 barrels of water per day at the moment, where we are on track to increase to 360,000 barrels per day by the end of the year as well as additional activities in the Sabahana envelope. Frontera's conventional natural gas and natural gas liquids increased 22% and 9%, respectively, quarter over quarter due to increased production at La Villesa field as a result of the compression facilities expansion and gas reinjection project, which increased processing capacity from 2,000 to 3,000 Ncf daily per day in the BIM-one block. The company's light and medium crude oil production was flat compared to the prior quarter as we benefit from an increase in our Ecuador production from the Pericco Norte 6 and Pericco Centro 2 wells coming online, offset by natural declines in our Colombian light and medium crude oil fields.

Speaker 4

We continue to invest in work order and well service activities to maintain production, primarily in the light and medium blocks. In the Q2, we completed 32 well workovers and currently have 4 workover rigs active on our blocks. In total, we drilled 30 wells at our Kifan, CP6 and Peripo blocks during the quarter. And we currently have 3 drilling rigs active on our Kifa and CP6 blocks. On the exploration side, at the Ira-one exploration well, all pre drill activities have been completed with pre modernization and the starting of the well expected in the Q3.

Speaker 4

In the Llanos 1 100 and 19 Block, the company acquired 80 square kilometers of 3 d seismic during the Q2. In the Jarnos 99 block, we continue pre cycling and social and environmental studies. In Ecuador, following recent successes in the Perico block, the first well of the Espero campaign called Espero Sur B3 has been completed, showing initial gross production of 500 barrels per day. The second well, Espejo Norte R1, A1, was spot at the end of July and drilling operations are ongoing. Despite some inflationary pressure on costs across the industry, we remain on track to achieve our 2024 capital production and EBITDA guidance.

Speaker 4

In our infrastructure business, during the quarter, ODL paid the 1st dividend and return of capital of $31,300,000 in April or approximately 50% of the $62,800,000 total dividend and capital returns payments the company expects to receive this year. Operationally, ODL continues to maintain strong operating and financial performance with transported volumes increasing about 1% quarter over quarter and EBITDA reaching EUR 68,000,000 for the quarter. Puerto Vallarta continues to move forward with its strategic agenda, breaking ground on the construction of the Rafical connection and achieving an important milestone with the start of horizontal drilling, directional drilling in the Canal Bemdike in July. During the quarter, we also started up our Sahara water treatment plant with a goal of reaching 250,000 barrels of water treated per day by the end of the year. During the month of June, the plant realized its first gross revenues associated with the water treatment collaboration agreement with Ecopetrol for the IFA block.

Speaker 4

I would now like to turn the call over to Rene Urgos from Terra's CFO.

Speaker 5

Thank you, Ramando. I'd like to take a moment to highlight a few key financial aspects of our 2nd quarter results. For the Q2, the company recorded a net loss of $2,800,000 or $0.03 per share. This quarter's net loss followed approximately $59,000,000 in income from operations per share of income from associates, which includes $13,000,000 of share of income from OREAL, offset primarily by roughly $16,000,000 in net finance cost, dollars 8,000,000 in losses related to risk management contracts and approximately $33,000,000 in income tax expenses, including almost CAD 31,000,000 in deferred income taxes, primarily due to the impact of nondeductible expenses and differences related to foreign currency fluctuations. During the quarter, the company assumed an income tax rate of 50% inclusive of the 15% surtax associated to the 2022 Colombian tax reform.

Speaker 5

Operating EBITDA for the quarter was approximately $110,000,000 Compared to the prior quarter, our EBITDA benefited from higher production volumes and sales volumes as well as higher oil prices, partially offset by mixed results on our cost side.

Speaker 4

From a buyer standpoint,

Speaker 5

I'd like to take a moment to share the key indicators related to our realized prices and cost. During the quarter, we saw weighted average Brent sales prices for Frontera of $84.06 and an average Vascona differential on our export sales of $4.10 This quarter, we also added a reconciliation of our purchased crude activities. This addition, we believe, will aid in understanding our operations and the impact of these operations activities on our operating netback. Our purchased crude NIB margin represents the difference between our purchased crude volume cost and the associated sales. These purchased crudes are used as part of our ongoing dilution needs as well as to be refined domestically for use within our internal operating consumption and domestic sales.

Speaker 5

For the Q2, the purchased crude net margin was $2.13 lower than $2.39 for the prior quarter. The quarter over quarter variance was the result of lower dilution needs. Taking a closer look at our operating cost, our production, energy and transportation cost per barrel for the quarter totaled $10.79 $4.74 $10.92 respectively. This compares with $10.21 $5.29 $11.33 in the prior quarter. The increase in production costs quarter over quarter resulted primarily from higher well service activities as well as the impact of FX rates and persistent inflationary pressures.

Speaker 5

On the energy front, as the dry season concludes, electricity prices in Colombia appear to be normalizing and are also trending lower so far this quarter, helping reduce energy costs, yet partially offset by higher energy use during the quarter. For the 2nd quarter, electricity costs accounted for 31% of our energy consumption and 46% of our total energy costs. On transportation, we saw cost decrease during the quarter due to an increase in local sales volumes as well as improved routing for some of our heavy crude oil production. During the quarter, our operating netback was $46.40 per BOE compared with $43.97 per BOE in the prior quarter. The increase was a result of higher oil prices during the quarter, lower transportation cost and energy cost partially offset by higher production cost.

Speaker 5

Cash generation for the quarter remained strong with cash flow from operations totaling $150,000,000 thanks in part to the strong Brent oil price environment, the reduction on withholding tax rates on export sales, receipt of dividend and capital payments from ODL and short term prepayment received from customers associated with crude sales. Capital expenditures for the quarter were roughly $80,000,000 primarily due to costs associated with drilling $30,000,000 wells, up from $21,000,000 in the prior quarter at Kifa, Kahua, CT6 and Benico blocks for a total of $38,000,000 On the infrastructure side, adjusted EBITDA in the Q2 of 2024 was $27,800,000 compared with $25,700,000 in the prior quarter. The quarter over quarter increase was due to improved performance at Puerto Valles, driven by higher liquids volumes and cost optimizations and greater sales volumes and revenues from Porrago Llanos, our palm oil plantation operation during the quarter. Audio volumes transported were 249,000 barrels per day during the Q2 of 2024 compared to 246,000 in the Q1, mainly due to an increase in crude oil volumes received and transported from Cagnasur in Jan of 34 blocks. ODL's EBITDA for the 2nd quarter was approximately CAD68 1,000,000, down 3% on a quarter over quarter basis, with inflationary pressures driving higher operating costs and G and A, partially offset by slightly higher volumes as compared to the 3rd quarter.

Speaker 5

As of June 30, 2024, the company reported a total cash position of $215,000,000 including $181,000,000 of unrestricted cash, of which $142,000,000 are in the issuer and bond guarantors. Following the other quarter, the company received approximately $90,000,000 in tax refund proceeds associated to its 2023 income tax return. Turning now to risk management. Our current risk management strategy continues to show how our hedging discipline supports our operations and planning. Frontera uses instruments to manage exposure to oil price and FX volatility.

Speaker 5

And on the oil side, the company entered into hedges, successfully securing a 40% hedging ratio until November 2024, protecting against a potential drop in oil prices at average strike of $75 to $78 per barrel. Combera has also entered into foreign exchange rate hedges totaling $90,000,000 covering 40% 20% of our expected peso exposure for the 3rd Q4 above the ARS 4,000 rate, respectively. These hedges provide the company with stability and help mitigate impacts from future fluctuations while allowing the business to deliver on targets. Finally, I'd like to provide an update on our shareholder value initiatives. Under the company's current NCIB, which commenced on November 21, 2023, the company has repurchased approximately 1,400,000 common shares or over 2% of our total common shares outstanding for cancellation or approximately 8,200,000 as of August 7.

Speaker 5

With respect to our quarterly dividend, on July 16, Frontera paid approximately CAD3.9 million or CAD0.625 per share to its shareholders. Together with today's results announcement, the Board declared a quarterly dividend of CAD0.625 per share payable to shareholders of record as of October 2, 2024, on or around October 16, 2024. Additionally, Frontera also announced its intention to commence a substantial issuer bid through which the company will offer to purchase $30,000,000 of its common shares for cancellation at a fixed price per share. The terms of the SIB including pricing will be determined in the course and the company expects that it will be completed in October 2024. The SIB will not be conditional upon any minimum number of shares being tendered and will be subject to conditions customary for transactions of this nature.

Speaker 5

As our Chairman said, this proposed distribution highlights the strong financial results of the first half of twenty twenty four. And the company believes this format, the SIB is the most efficient means to achieve capital to all of our shareholders and look forward to the launching of this process soon. Together with the proposed SIB, the company is poised to return so far this year over $51,000,000 of capital to our stakeholders, including $11,700,000 in the core dividends, dollars 6,700,000 of common share repurchases and $3,500,000 in buyback of its 20 28 unsecured notes. Contera continued to take actions to unlock value for all of its stakeholders and is committed to its efforts for the remainder of 2024 and beyond, including the ongoing strategic review processes as well as potential additional distributions. I would like to now turn the call back to Rolando.

Speaker 4

Thank you. Thank you, Rene. Before I wrap up today's call, I would like to highlight that the quarter Frontera achieved 48% of its sustainability goals for the year. During the Q2, Frontera expanded its protection and preservation coverage activities to 168 hectares. The company invested $500,000 in projects and communities near our operation in Colombia, Ecuador and Guyana and purchased 10.7% of our total goods and services from local suppliers.

Speaker 4

And finally, the joint venture and the government of Guyana have engaged in regular, constructive and collaborative conversations throughout the joint venture standard on the quarantine block, including discussions regarding the notice of potential commercial interest for the Way 1 discovery, timing and conditions under which further activities could be performed in the current envelope. The JV looks forward to completing these discussions in an expeditious manner and will provide an update as soon as practical. Along with our active pursuit of a strategic alternative for our interest in the quarantine block in Guyana, which is still ongoing and our recently announced strategic alternatives review for our growing Colombian infrastructure business, the company remains focused on unlocking value from the sum of its parts. With that, I would like to conclude by saying thank you to Gabriel and Tene for their comments, and thank you everyone for attending our call. I will now turn the call back to our operator, who will open up for questions.

Speaker 1

Thank you. First question comes from Daria Lima at Bloomberg Intelligence. Please go ahead.

Speaker 3

Hi. Hello. Congrats on the great quarter. I just have a couple of questions. Hello?

Speaker 1

Can you hear me?

Speaker 4

Yes, we can hear you. We can hear you, yes.

Speaker 3

Okay. Great. Thank you. So my first question is on the cost base. I noticed that your energy cost went down, however your production costs have expanded.

Speaker 3

Could you please shed some light on that?

Speaker 5

As we said earlier, there's 2 things happening. On the energy side, we continue to see a normalization of energy prices, particularly electricity costs, now that the dry season is over. And we actually do expect electricity cost to continue to trend lower for the remainder of the year. Today, for example, electricity cost accounts for 31% of our consumption, and yet they are still around close to 50% of our total cost. So we expect to continue to see some benefits there going forward.

Speaker 5

On the operation side, we have had we communicated this last quarter, we've included additional workover activity in some of our blocks to optimize our production. This will be potentially CapEx, and that has increased our cost. However, we have also seen the impact of FX and persistent inflation driving some of these costs higher. We expect those to normalize over the rest of the year, but we're still kind of in the middle of that impact.

Speaker 3

Thank you. That's very clear. And just the second question on the Raficar connection. What do you estimate its EBITDA contribution would be? And what would be the time line for that?

Speaker 5

We are very excited about the Redfin car connection. We expect it to become operational in December of this year. And we believe this is something that would help the economy in the region and support the significant investment by Ecopetrol and the Refinery. What we have guided to is we believe a significant amount of volumes are going to go through the port, potentially then doubling the volumes of the port. If you think about it as measured by the capacity of the pipe, but we have not yet indicated or guided on an EBITDA number.

Speaker 5

However, we do believe that the potential value or EBITDA driver here is significant. It measures just on a volume basis.

Speaker 4

Just to give you just some color. As you could see in the press release, we are handling in the second quarter, we handled around 64,000 barrels of liquids in the port. The connection line that we are building as we speak and we expect to become operational by the end of the year has the capacity to handle 84,000. So that is why it's saying that this has I mean, this project has the capacity to double in terms of volumes, the handling of liquids in the port.

Speaker 3

I see. Thank you. And you expect to use this new pipeline to maximum capacity?

Speaker 5

We I think what we said earlier, our agreement with Ecopetrol for the connection is a take and pay. So that's what we're guiding based on volumes. And we would expect, look, we want to maximize the volume. I think there is a lot to be said about the benefits to Ecopetrol and Reficar by joining it.

Speaker 3

Okay. Thank you.

Speaker 1

Thank you. The next question comes from Christian Ferra at K&G Securities. Please go ahead.

Speaker 2

Hello, everyone.

Speaker 6

Thanks for the presentation and congratulations for the results. So I have three questions. If you don't mind, I'd like to go 1 by 1. The first question is regarding the tax situation, if you could provide us some color on that. Specifically, why did you receive this $19,000,000 refund?

Speaker 6

And what are the taxes that we should expect for the full year? Thanks.

Speaker 5

No, excellent. So thank you very much for your question, Christian. So 2 your 2 questions. The second question, I'll tackle first. We are in line with our guidance as it relates to the net cash taxes to pay for the year.

Speaker 5

So I'll point you to that. I think, as we said, we expect to pay for the year net taxes or receive a net benefit of between $10,000,000 $20,000,000 so that is in line with that. As it relates to our tax situation, you need to remember that we pay taxes in primarily 2 ways. One is our withholding that we make, and we make a withholding base of 5.6% every year, every month, and that's on our group sales. And then at the end of the year, when we actually file our tax declaration, then we pay up the difference.

Speaker 5

And hopefully, this will help me answer the second question sorry, your first question. So on your first question, Frontera has carried significant deferred tax assets for years. And what has happened is with the government increasing the tax rate to 50%, some of these dollars have now been accelerated. And what that $90,000,000 recovery is the repayment of last year's withholding tax payments in excess of our actual tax bill as offset by our DTAs. That's effectively what it is.

Speaker 5

And the process to get a tax refund is one that started in March, and we were successfully concluded that in July. Does that make sense?

Speaker 6

Okay. Yes, that's great. Thanks. My second question is regarding this repurchase program, the new repurchase program that you announced. So will this be contingent to the infrastructure business sale?

Speaker 6

And if so or if not, do you plan to use all these $30,000,000 by 2034?

Speaker 5

So look, this is a great question. And I want to do 2 things. 1, I will point people back in time. In June of 2022, we announced an SIB. And at that time, we repurchased roughly $50,000,000 worth of shares.

Speaker 5

At that time, we also used a modified Dutch auction process to perform that SIB. This time around, we're assuming a this process is one that is going to be launched. We hope to be launching it over the next few weeks, and we expect to end it in October. So to answer your question, no, it's not contingent on any 2 ks transaction. It is just a matter of time for us to get our documentation ready and be able to launch it for shareholders to participate.

Speaker 5

The second thing that I

Speaker 4

would say to that is

Speaker 5

as we analyze the different alternatives for us to distribute capital to shareholders, and SIB at a fixed price is the most attractive way and the most efficient way considering the jurisdiction and location of the different shareholders that support this company. So we hope full participation of all of our investors because this we believe is the best way, cleanest and most efficient way to distribute this capital back.

Speaker 6

Okay. So that means that by October, you should be using this $30,000,000 to buy back the shares? Yes. Okay. Thanks.

Speaker 6

And the third question is regarding your PIL loan. So I was wondering that in case you sell the ODL pipeline your stake, will you need to repay this loan? Or are you interested in doing so? Thanks.

Speaker 5

Look, I firstly, I would like to really thank the team at Macquarie and our other lenders. They have been very supportive of us, also providing us capital to build the Epicard connection. So we're very thankful, and we built a very strong relationship with them. So we appreciate their support. As part of a potential transaction and monetizing some of our assets, the most clear path would be for us to repay that loan.

Speaker 5

And I think there are some covenants associated with that. And also, it is look, it is an extensive loan for what we believe is the value of the underlying assets. So our running assumption is in the event of a potential monetization is that, that facility gets repaid.

Speaker 6

Okay. That's great. Thank you so much.

Speaker 1

Thank you. Our next question comes from Juan Cruz at Morgan Stanley. Please go ahead.

Speaker 7

Good morning, Tim Frontera. Congrats on the nice results. Perhaps you can help us understand a little bit more what's happening the Guyana operation. There was some confusion in the marketplace last week because there was a statement made by the government about some licenses that CGX and Frontera own in some of the blocks that there was a noise some noise about whether or not they will be extended. And that caused some sort of confusion in the marketplace.

Speaker 7

Maybe you can help us explain what that means for you and what that means, if it's in fact valid or if not at all, what that means for the different blocks either the quarantine or if this affects in any way, shape or form your efforts to farm down or to find partners for your operation in Guyana? That's all.

Speaker 4

Okay. Thank you Juan for the question. As I mentioned earlier, the JV and the Board of Guyana, we are continuing I mean, we are continuing to say, I mean, regular, very constructive, constructive and collaboration conversations throughout the JV's tenure on the quarantine block, including discussions regarding conditions under which further activities could be performed by the JV in the block. So we will continue with those conversations. We will continue with our efforts.

Speaker 4

We fully to unlock value in the block. And we will provide certainly an update to the market as soon as practical. So that's the only thing that I can say at this point in time.

Speaker 7

Okay. So as far as we're concerned, the process continues normally?

Speaker 4

That is correct, yes.

Speaker 2

Okay. All

Speaker 7

right. So no changes to your licenses, no potential return of any blocks for the time being?

Speaker 4

No changes. And as I said, we will provide the upgrade as soon as possible.

Speaker 7

Okay, fair enough. Thank you.

Speaker 4

Thank you, Juan.

Speaker 1

Thank you. Next question from Daria Lima at Bloomberg Intelligence. Please go ahead.

Speaker 3

Hi. Thank you. My question was just asked by Juan, so all good here. Thank you.

Speaker 1

Thank you. Next question from Christine Guerrero at Octane Investments. Pardon me, this does conclude our Q and A session. I will turn the call back over for closing comments.

Speaker 4

I think you said that Christine was going to ask something.

Speaker 1

Christine has no longer in queue. I apologies.

Speaker 4

Sorry?

Speaker 1

One moment, please.

Speaker 4

I think you mentioned that Christine was going to ask something about it.

Speaker 8

Here.

Speaker 1

Yes. Christine, please go ahead. Your line is open.

Speaker 8

Yes. Thank you. Thank you for taking my question. I was wondering why I was bumped out of the queue, but I've

Speaker 3

still been

Speaker 8

here. So kind of cycling back to the statements being made from the Vice President of Guyana in his weekly press conferences. He's recently stated that right now the quarantine license appears to be in limbo because the extension hasn't been granted as CGX did not supply the government sufficient information of their financial capabilities. But really, if you look at the state of CGX and Frontera, I mean nothing has really changed with these two companies since they acquired the licenses. So what I'm wondering is if for some reason the state?

Speaker 8

Since they appear to be acting in bad state?

Speaker 4

Christine, thank you for your question. And to be honest, I don't have anything else to add to what I previously said, respond to Juan's question. The conversations are regular. We believe are very conservative, and we will continue to have those conversations. So to be honest, nothing else to add.

Speaker 8

Okay. Yeah. I just like I said, I was I was wondering about the legal point of it, but I I think I think getting that, made public is is probably good enough.

Speaker 3

Because like

Speaker 8

I said, it appears to be a bad faith issue on the part of the government if the JV has been fulfilling its requirements and yet the license extension isn't forthcoming because that traditionally speaking within the industry that would have been a rubber stamp situation.

Speaker 4

Thank you, Christine. Thank you for your question.

Speaker 1

Thank you. We don't have any further questions. You may proceed with closing comments.

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Key Takeaways

  • Entered a 2-year water treatment contract with Ecopetrol at the Sara facility, targeting 250,000 bbl/d capacity by end-2024 to boost crude output by 1,000 bbl/d per 100,000 bbl treated.
  • Broke ground on a bidirectional flow line to Reficar and formed an LPG import JV with Gasco at Puerto Bahía, projects expected to double liquids volumes and expand Colombia’s energy infrastructure.
  • Q2 production rose 5% QoQ to 39,900 boe/d, driven by a 6% increase in heavy oil and a 22% jump in gas/NGLs, supported by new water handling and compression facilities.
  • Reported operating EBITDA of $110 M and $150 M of cash flow from operations despite a $2.8 M net loss, while maintaining hedges on 40% of oil output at $75–78/bbl and 40% of peso exposure.
  • Declared a quarterly dividend of CAD 0.625/share and announced a $30 M substantial issuer bid, adding to YTD returns of CAD 11.7 M in dividends, $6.6 M in share buybacks, and $3.5 M in bond repurchases for $51 M total.
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Earnings Conference Call
Frontera Energy Q2 2024
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