Frontera Announces 2024 Capital and Production Guidance, Estimated Fourth Quarter 2023 and Full-Year Daily Average Production and Provides an Update on Shareholder Initiatives, Including Initiating a Dividend
- Anticipated
$400-$450 million in consolidated Operating EBITDA at$80 /bbl average Brent while investing$272-335 million in total consolidated capital expenditures, a 32% decrease at the midpoint compared to 2023. - Deploying
$230-$280 million , including$35-$45 million exploration investments, in the Company's coreColombia and Ecuador Upstream business, a 10% decrease at the midpoint compared to 2023, to deliver 40,000-42,000 boe/d full year production for 2024. - Investing
$35-$45 million to drill three exploration wells including the high-impact Hydra-1 well in the VIM-1 block inColombia and two wells in the Espejo Block inEcuador and additional seismic and pre-drilling activities inColombia . - Investing
$40-$50 million in the Company's standalone and growing Colombia Infrastructure business mainly to build the 6.8-kilometre, 18-inch pipeline connection between theReficar Refinery and the Company'sPuerto Bahia's Liquids Terminal and to commission the SAARA Reverse Osmosis Water Treatment Facility at Quifa. - Estimating total production costs, including both production and energy costs for 2024 to average
$14.25 –$15.75 , primarily driven by El Niño-related higher energy costs. Transportation costs for 2024 are forecasted to average$11.00 -$12.00 per boe. - Hedging approximately 40% of the Company's estimated production after royalties at an average Brent price of
$73.34 throughJune 2024 , providing revenue visibility and reducing exposure to price volatility. - Initiating a quarterly dividend of CAD
$0.0625 per share payable quarterly, following the release of year-end 2023 results, subject to regulatory approval, and repurchasing up to 3.95 million Common Shares for cancellation through the Company's recently announced Normal Course Issuer Bid (NCIB). - Considering future additional shareholder value enhancing initiatives, including additional dividends, distributions, or bond buybacks, based upon overall results of our businesses and the Company's strategic goals.
"In 2023, we delivered estimated average daily production of approximately 40,919 boe/d, in line with our guidance range, while deploying significant capital to successfully advance our exciting offshore
Guided by our strategy of value over volumes and our track record of improving capital efficiency, in 2024 we will invest
Our 2024 capital and production plan is fully funded, protected by a prudent hedging program, and leans into the most productive and profitable assets within our portfolio, capitalizing on outstanding near field opportunities at our Quifa, CPE-6 and VIM-1 producing blocks, while delivering our quickest payback barrels with sustained future growth potential. We expect that our development program, together with our exploration investments led by our potentially high-impact Hydra-1 well in the VIM-1 block in
Frontera has generated approximately
Guidance Metrics |
Unit |
2023 Guidance |
2024 Full Year Guidance Frontera Consolidated |
Average Daily Production (1) |
boe/d |
40,000 - 43,000 |
40,000 - 42,000 |
Production Costs (excl. energy costs) (2)(4) |
$/boe |
|
|
Energy Costs (2)(4) |
$/boe |
|
|
Transportation Costs (3)(4) |
$/boe |
|
|
Operating EBITDA(5) at |
$MM |
|
|
Upstream Operating EBITDA |
$MM |
|
|
Infrastructure Operating EBITDA(7) |
$MM |
|
|
Adjusted Infrastructure EBITDA(8) |
$MM |
|
|
Development Drilling |
$MM |
|
|
Development Facilities |
$MM |
|
|
|
$MM |
|
|
|
$MM |
|
|
Other(9) |
$MM |
|
|
Total |
$MM |
|
|
Colombia Infrastructure(10) |
$MM |
|
|
Guyana Exploration |
$MM |
|
|
Total Capital Expenditures (11) |
$MM |
|
|
|
|
Notes: |
|
1 |
The Company's 2024 average production guidance range does not include in-kind royalties, operational consumption, quality volumetric compensation or potential production from successful exploration activities planned in 2024. |
2 |
Per-bbl/boe metric on a share before royalties' basis. |
3 |
Calculated using net production after royalties. |
4 |
Supplementary financial measure (as defined in National Instrument 52-112 - Non-GAAP and Other Financial Measures ("NI 52-112")). See "Advisories – Non-IFRS Financial and Other Measures". |
5 |
Non-IFRS financial measure (equivalent to a "non-GAAP financial measure", as defined in NI 52-112). "Operating EBITDA" represents the operating results of the Company's [ |
6 |
Current Guidance Operating EBITDA calculated at Brent |
7 |
Includes |
8 |
Reported Adjusted Infrastructure EBITDA (previously referred to as Adjusted Midstream EBITDA) is a non-IFRS financial measure used to assist in measuring the operating results of the Infrastructure business, including the proportional consolidation of the 35% equity investment in the ODL pipeline. |
9 |
Other includes |
10 |
Colombia Infrastructure includes investments related to the Reficar connection, SAARA Reverse Osmosis Water Treatment Facility and safety, maintenance activities and operational optimizations in the Port. |
11 |
Non-IFRS financial measure (equivalent to a "non-GAAP financial measure", as defined in NI 52-112). See "Advisories – Non-IFRS Financial and Other Measures". Capital expenditures excludes decommissioning. |
NCIB:
Under the Company's current NCIB which commenced on
Quarterly Dividend
: The Board of Directors has adopted a dividend policy to pay a dividend of CAD
Frontera remains committed to unlocking value and enhancing shareholder returns and will continue to consider future shareholder value enhancement initiatives in 2024, including potential additional dividends, distributions, or bond buybacks, based on the overall results of our businesses and the Company's strategic goals.
Frontera's 2024 capital and production guidance is based on an average 2024 Brent price of
Other key 2024 guidance highlights include:
- Estimated
$35-$45 million in dividends, net of taxes, to be received from the Company's interest in the ODL pipeline. - Debt service payments are estimated to be approximately
$60-70 million for 2024, including a payment of approximately$32 million for interest associated with the Company's 2028 senior notes, and the repayment of the$18 million Bancolombia working capital loan. -
Pipeline Investment LTD ("PIL") debt service payments include$15 million of amortization payments as well as interest payments on the facility. These amounts are net of additional committed funding, subject to certain conditions precedent, in connection with the construction of the Reficar pipeline.
Upstream Business |
($millions) |
Upstream Operating EBITDA |
|
Cash Taxes(1) |
|
Debt Service(2) |
|
Upstream Capex |
|
Upstream Free Cash Flow |
|
Infrastructure Business |
($millions) |
Infrastructure Operating EBITDA(3) |
|
ODL Dividends, net of taxes |
|
PIL Debt Service, net(4) |
|
Infrastructure Capex |
|
Infrastructure Free Cash Flow |
|
|
|
Notes: |
|
1 |
Cash taxes paid including withholding taxes, VAT payments and estimated tax recoveries. |
2 |
Debt service includes interest on the 2028 senior notes, working capital loans debt service payments, Petrosud debt service and leases. |
3 |
Includes |
4 |
PIL debt service is net of new funding in connection with the construction of the Reficar Connection of |
In the Company's core
The Company will focus on its inventory of near-field development drilling opportunities at its Quifa, CPE-6 and VIM-1 producing blocks, invest in development facilities to enhance its water-handling capacity at CPE-6 and increase its gas processing capacity at VIM-1. Frontera's capital program also includes
The Company's 2024 average production guidance range does not include in-kind royalties, operational consumption, volumetric compensation or, potential production from successful exploration activities planned in 2024. The Company anticipates delivering
To provide enhanced clarity, as part of its 2024 Guidance, the Company is providing additional details on its key operating cost drivers, including a breakdown of production-associated energy costs.
In USD per barrel |
2023 |
2024 |
Production Costs (ex. Energy Cost) |
|
|
Energy Costs |
|
|
Total Production Costs |
|
|
Transportation Costs |
|
|
The Company estimates 2024 production costs to average
Energy costs, described as electricity consumption and the costs of localized energy generation, to average
Transportation costs for 2024 are forecasted to average
Brent Crude Oil Price ($/bbl) |
|
|
|
Consolidated Operating EBITDA ($MM) |
|
|
|
Cash Taxes ($MM)(1) |
|
|
|
|
|
Note: |
|
1 |
Cash taxes paid including withholding taxes, VAT payments and estimated tax recoveries. |
Frontera's anticipated total 2024 Colombia and Ecuador Upstream capital expenditures of
Frontera anticipates spending approximately
- Quifa block: Frontera plans to drill 27 wells (26 producer wells and one injector well) in the Quifa SW field, and install additional flow lines in the Quifa block, including investments to increase water handling capacity via a connection to the SAARA project. At the Cajua field, Frontera plans to drill 11 producer wells.
- CPE-6 block: the Company plans to drill 17 wells (16 producer wells and one injector well) and install additional flow handling and injector line facilities. In addition, the Company plans to increase water handling capacity to 360,000 bbls/day. In 2023, the Company doubled water handling capacity to approximately 240,000 bbls/day, which supported an increase in production to 5,487 boe/d in 2023, compared to 4,991 boe/d in 2022.
- VIM-1 block (Frontera 50% W.I., non-operator): the Company plans to initiate Phase 1 expansion of La Belleza facilities and flow lines to increase gas processing capacity from 20,000 to 30,000 Mcf/day.
- Other fields: In Sabanero, the Company expects to drill four production wells plus install additional injection facilities.
- Other Capex: The Company plans to invest in new field production technologies to enhance operational efficiency and mitigate water production.
-
Perico (Frontera 50% W.I. and operator): Building on the successful 2023 drilling and testing program in the new combined structural/stratigraphic U-sand play, Frontera intends to drill three wells and install additional flow lines and facilities.
In 2024, the Company anticipates spending
- Drilling the high-impact exploration Hydra-1 well in the VIM-1 Block (Frontera 50% W.I., non-operator) targeting gas and condensate. Frontera plans to utilize new seismic processing technology to drill this prospect, expected to be spud mid-year 2024.
- Drilling two wells in the Espejo block (Frontera 50% W.I., non-operator) in
Ecuador , near the Pashuri-1 discovery in Lower U Ss. These two wells will satisfy the exploration commitments in the block. - Acquire 3D seismic and complete pre-drilling activities and civil works at the Llanos-119 blocks, complete pre-drilling activities in the Llanos 99 block and pre-seismic activities in the VIM-46 block.
In the Company's standalone and growing
-
Puerto Bahia : The construction of the Reficar connection is anticipated to cost approximately$30 million . The connection will be built, operated, and maintained byPuerto Bahia and will have a capacity of up to 84,000 bbls/day. The connection will be capable of handling imported and domestically produced crudes. Frontera anticipates breaking ground in the first quarter of 2024 and connection start-up by end of 2024. Frontera is in the process of securing an additional$30 million in funding, subject to certain conditions precedent, for this project from its existing group of lenders led by Macquarie Group. The financing is expected to close this month. - SAARA: During 2024, Frontera successfully completed the pilot phase of the SAARA project with Ecopetrol. Frontera intends to invest in the commissioning of the first phase of the project, the stabilization phase, to reach a minimum of 250,000 barrels of water per day available for the Quifa block, subject to final JV approval.
As part of its risk management strategy, Frontera uses derivative commodity instruments to manage exposure to price volatility by hedging a portion of its oil production. The Company's strategy aims to protect 40-60% of its estimated net after royalties' production using a combination of instruments, capped and non-capped, to protect the revenue generation and cash position of the Company, while maximizing the upside, allowing the Company to take a more dynamic approach to the management of its hedging portfolio. Consistent with this strategy, the Company entered new put hedges totaling 2,574,826 bbls to protect a portion of the Company's production through
Term |
Type of Instrument |
Open Positions (bbl/d) |
Strike Prices Put/Call |
|
Put |
13,823 |
80.00 |
|
Put |
13,601 |
72.00 |
|
Put |
13,497 |
72.00 |
1Q-2024 |
Total Average |
13,641 |
74.76 |
|
Put |
14,711 |
72.00 |
|
Put |
14,586 |
72.00 |
|
Put |
14,667 |
72.00 |
2Q-2024 |
Total Average |
14,653 |
72.00 |
The Company is exposed to foreign currency fluctuations primarily arising from expenditures that are incurred in COP and its fluctuation against the USD. As of
Term |
Type of Instrument |
Open Interest (US$ MM) |
Strike Prices Put/ Call |
Hedging Ratio |
|
1Q-2024 |
Zero-cost Collars |
60 |
4,125 / 4,763 |
40 % |
|
2Q-2024 |
Zero-cost Collars |
60 |
4,125 / 4,763 |
40 % |
|
Oct, 2024 |
Forward |
17 |
4,386 |
|
|
Frontera's estimated 2023 average daily production of approximately 40,919 boe/d was in-line with the Company's 2023 production guidance of 40,000-43,000 boe/d and an approximately 1% decrease compared to the Company's 2022 average production. Frontera's estimated average daily production for the fourth quarter was approximately 39,267 boe/d. The lower production during the quarter was primarily the result of lower planned drilling activity, and natural declines in the Company's light and medium oil fields. See the table below for production by product type.
|
2023 Year-End |
Heavy crude oil production (1) |
23,359 bbl/d |
Light and medium crude oil combined production (1) |
14,856 bbl/d |
Total crude oil production |
38,215 bbl/d |
Conventional natural gas production (1) |
6,042 Mcf/d |
Natural Gas liquids production (1) |
1,644 boe/d |
Total production (2) |
40,919 boe/d (3) |
|
|
Notes: |
|
1 |
References to heavy crude oil, light and medium crude oil combined, conventional natural gas and natural gas liquids in the above table and elsewhere in this news release refer to the heavy crude oil, light crude oil and medium crude oil combined, conventional natural gas and natural gas liquids, respectively, product types as defined in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). |
2 |
Represents W.I. production before royalties. Refer to the "Further Disclosures" section of the Company's management's discussion and analysis for the three months ended |
3 |
Boe has been expressed using the 5.7 to 1 Mcf/bbl conversion standard required by the |
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This news release contains forward-looking information within the meaning of Canadian securities laws. Forward-looking information relates to activities, events, or developments that the Company believes, expects, or anticipates will or may occur in the future. Forward-looking information in this news release includes, without limitation, statements relating to the Company's expectations regarding operational and financial progress throughout the year; statements regarding the declaration and payment of quarterly dividends, estimates and/or assumptions in respect of corporate strategy, statements relating to the Company's guidance and objectives for 2024 (including production levels, intended capital investments, production costs, energy costs, transportation costs, operating EBITDA, average Brent prices, capital expenditures and certain income taxes payable by the Company); statements regarding the Company's ability to service its current debt facilities; statements regarding the Company's water handling capacity and anticipated growth in production, including expectations regarding expected impacts of the Company's reverse osmosis water treatment facility (SAARA); anticipated exploration, development and drilling activities and seismic acquisition; statements regarding the construction of the Company's connection project; statements regarding expected production and cash flows; expectations regarding opportunities of the Corentyne block; expectations regarding possible shareholder enhancement initiatives; statements regarding the Company's ESG strategy and the impact thereof; and expectations with respect to the Company's hedging strategy. All information other than historical fact is forward-looking information.
Forward-looking information reflects the current expectations, assumptions and beliefs of the Company based on information currently available to it and considers the Company's experience and its perception of historical trends, including expectations and assumptions relating to commodity prices and interest and foreign exchange rates; the current and expected impacts of the COVID-19 pandemic, actions of the
Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be placed on such information. Forward-looking information is subject to a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to the Company. The actual results may differ materially from those expressed or implied by the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, the Company. The Company's annual information form dated
Certain information included in this news release may constitute future oriented financial information and/or financial outlook (collectively, "FOFI") within the meaning of applicable Canadian securities laws. Such FOFI has been prepared by management to provide an outlook of the Company's activities and results and may not be appropriate for other purposes. Management believes that the FOFI has been prepared on a reasonable basis, reflecting management's reasonable estimates and judgments; however, actual results of the Company's operations and the resulting financial outcome may vary from the amounts set forth herein. Any FOFI speaks only as of the date on which it was made, and the Company disclaims any intent or obligation to update any FOFI, whether as a result of new information, future events or otherwise, unless required by applicable laws.
This news release contains various "non-IFRS financial measures" (equivalent to "non-GAAP financial measures", as such term is defined in NI 52-112) and "supplementary financial measures" (as such term is defined in NI 52-112), which are described in further detail below. Such financial measures do not have standardized IFRS definitions. The Company's determination of these financial measures may differ from other reporting issuers, and they are therefore unlikely to be comparable to similar measures presented by other companies. Furthermore, these financial measures should not be considered in isolation or as a substitute for measures of performance or cash flows as prepared in accordance with IFRS. These financial measures do not replace or supersede any standardized measure under IFRS. Other companies in our industry may calculate these financial measures differently than we do, limiting their usefulness as comparative measures.
The Company discloses these financial measures, together with measures prepared in accordance with IFRS, because management believes they provide useful information to investors and shareholders, as management uses them to evaluate the operating performance of the Company. These financial measures highlight trends in the Company's core business that may not otherwise be apparent when relying solely on IFRS financial measures. Further, management also uses non-IFRS measures to exclude the impact of certain expenses and income that management does not believe reflect the Company's underlying operating performance. The Company's management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period and to prepare annual operating budgets and as a measure of the Company's ability to finance its ongoing operations and obligations.
Set forth below is a description of the non-IFRS financial measures and supplementary financial measures used in this news release.
EBITDA is a commonly used non-IFRS financial measure that adjusts net (loss) income as reported under IFRS to exclude the effects of income taxes, finance income and expenses, and DD&A. Operating EBITDA is a non-IFRS financial measure that represents the operating results of the Company's primary business, excluding the following items: restructuring, severance and other costs, post-termination obligation, payments of minimum work commitments and, certain non-cash items (such as impairments, foreign exchange, unrealized risk management contracts, and share-based compensation) and gains or losses arising from the disposal of capital assets. In addition, other unusual or non-recurring items are excluded from operating EBITDA, as they are not indicative of the underlying core operating performance of the Company.
Since the three and six months ended
The equivalent historical non-GAAP financial measure to 2024 operating EBITDA guidance is operating EBITDA for the year ended
Capital expenditures is a non-IFRS financial measure that reflects the cash and non-cash items used by the Company to invest in capital assets. This financial measure considers oil and gas properties, plant and equipment, infrastructure, exploration and evaluation assets expenditures which are items reconciled to the Company's Statements of Cash Flows for the period.
Production Cost Per Boe, Energy Cost Per Boe, Transportation Cost Per Boe
Production costs mainly includes lifting costs, activities developed in the blocks, and processes to put the crude oil and gas in sales condition and excludes energy costs. Production cost per boe is a supplementary financial measure that is calculated using production cost divided by production (before royalties).
Energy costs mainly includes electricity consumption and the costs of localized energy generation. Energy cost per boe is a supplementary financial measure that is calculated using energy cost divided by production (before royalties).
Transportation costs includes all commercial and logistics costs associated with the sale of produced crude oil and gas such as trucking and pipeline. Transportation cost per boe is a supplementary financial measure that is calculated using transportation cost divided by net production after royalties.
Adjusted Infrastructure EBITDA
Adjusted Infrastructure EBITDA refers to the Adjusted EBITDA for the Infrastructure segment including the proportional consolidation of the 35% equity investment in the ODL pipeline accounted for using the equity method for consolidated financial statement purposes. Adjusted Infrastructure EBITDA is a non-IFRS financial measure used to assist in measuring the operating results of the Infrastructure Segment business.
Reported production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this news release due to, among other factors, difficulties or interruptions encountered during the production of hydrocarbons.
The term "boe" is used in this news release. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of cubic feet to barrels is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In this news release, boe has been expressed using the Colombian conversion standard of 5.7 Mcf: 1 bbl required by the
bbl(s) |
Barrel(s) of oil |
bbl/d |
Barrel of oil per day |
boe |
Refer to "Boe Conversion" disclosure above |
boe/d |
Barrel of oil equivalent per day |
Mcf |
Thousand cubic feet |
W.I. |
Working Interest |
SOURCE