Recorded Full Year Net Income of $193.5 Million, Including $92.0 Million in Q4’23
Delivered Full Year Average Daily Production of 40,919 Boe/d
Generated Full Year Operating EBITDA of $467.2 Million
Generated Full Year Adjusted Infrastructure EBITDA of $119.8 Million and Segment Income of $69.3 Million
Declared Quarterly Dividend of C$0.0625 Per Share, Or $3.9 Million in Aggregate, Payable on or around April 16, 2024
Recorded 164.1 Million Boe 2P Gross Reserves and 108.7 Million 1P Gross Reserves
$3.5 Billion 2P Net Present Value Before Tax Discounted At 10% As At December 31, 2023
7.3 Year 1P and 11.0 Year 2P Gross Reserves Life Index
514-628 Mmboe PMean Unrisked Gross Prospective Resources Estimated in Maastrichtian Horizons in the Northern Portion of the Corentyne Block
Commissioned First Solar Farm, Offset 50% of Emissions Through Carbon Credits, and Preserved and Restored 1,681 New Hectares in Casanare and Meta, Colombia
CALGARY, AB, March 7, 2024 /PRNewswire/ – Frontera Energy Corporation (TSX:FEC) (“Frontera” or the “Company”) today reported financial and operational results for the fourth quarter and year ended December 31, 2023, and announced the results of its annual independent reserves assessment conducted by DeGolyer and MacNaughton Corp (“D&M”). All financial amounts in this news release and the Company’s financial disclosures are in United States dollars, unless otherwise stated. All of the Company’s booked reserves for the year ended December 31, 2023, are located in Colombia and Ecuador.
“During 2023, Frontera continued to take concrete steps to deliver significant value to shareholders. The Company delivered EBITDA of $467MM, at the higher end of guidance for 2023, closing the year with a strong balance sheet including $190 million cash position, and having a fully funded plan for 2024.
Our significant Infrastructure business generated Adjusted Infrastructure EBITDA of approximately $120 million and keeps building momentum following the announcement of the connection agreement between Refineria de Cartagena S.A.S (“Reficar”) and Puerto Bahia’s liquids terminal. On its Guyana exploration business, Frontera, and its JV partner CGX Energy Inc. (“CGX”) with support from Houlihan Lokey, is pursuing a review of strategic options, including a farm down of its interest in Offshore Guyana, following the announcement of a second discovery in the Corentyne block. Lastly, the Company during the 4th quarter of 2023 renewed its normal course issuer bid (“NCIB”) program and repurchased approximately 741,700 Common Shares for cancellation, returning $5.9 million to shareholders in 2023.
Frontera recently announced the initiation of a new quarterly dividend and remains committed to enhancing shareholder returns. The Company will continue to consider future shareholder value enhancement initiatives in 2024 and beyond, including potential additional dividends, distributions, or bond buybacks, based on the overall results of our businesses and strategic goals.”
“Frontera successfully achieved its strategic, capital and production targets across the Company’s three core businesses in 2023:
Through our Colombia and Ecuador Upstream onshore business, we delivered average daily production of 40,919 boe/d, with an increase to our heavy crude oil production of 9% year over year, while maintaining our production costs, transportation costs and capital expenditures within guidance.
Our commitment to sustained production and value over volumes continues to be supported by our upstream Colombia and Ecuador reserves which closed the year with 108.7 million and 164.1 million boe in 1P and 2P gross reserves, respectively. Achieved a three-year average gross Reserves Replacement Ratio of 79% for 2P Reserves and 104% for 1P reserves, while maintaining a Reserve Life index of 7.3 Years for 1P reserves and 11.0 Years for 2P reserves, and a significant 2P net present value of $3.5 billion before tax discounted at 10%.
In our standalone and growing infrastructure business, we generated full year Adjusted Infrastructure EBITDA of approximately $120 million. ODL transported over 243,000 bbl/day, generated $285 million in full year EBITDA and distributed over $135 million to its shareholders. Proportional to its 35% interest, the Company received $47 million in capital distributions and Frontera’s Adjusted Infrastructure EBITDA benefited from $100 million associated with ODL’s EBITDA. Puerto Bahia generated approximately $20 million in operating EBITDA, reached a connection agreement, started pre-construction activities with Reficar, and successfully refinanced its existing legacy project finance debt with room to grow.
In our potentially transformational Guyana exploration business, as announced in the December 11th, 2023 news release, we successfully completed the second well of our two-well program, where we believe that approximately 514-628 mmboe PMean unrisked gross prospective resources are present in multiple Maastrichtian horizons in the northern portion of the Corentyne block.
Frontera is committed to sustainability and achieved 108% of its 2023 ESG goals. We started the operation of our first solar farm named “Ikotia” in December which we expect will reduce CPE-6 power consumption from the grid and offset 50% of the block’s scope 1 emissions.
As we turn now to 2024, we remain focused on executing our recently announced 2024 plan and continuing to deliver sustainable value-focused production, strong operational and financial results, and driving shareholder returns.”
Fourth Quarter and Full Year 2023 Operational and Financial Summary
Year ended
December 31
Q4 2023
Q3 2023
Q4 2022
2023
2022
Operational Results
Heavy crude oil production (1)
(bbl/d)
23,002
24,097
22,144
23,359
21,441
Light and medium crude oil combined production (1)
(bbl/d)
13,795
13,964
17,073
14,856
17,274
Total crude oil production
(bbl/d)
36,797
38,061
39,217
38,215
38,715
Conventional natural gas production (1)
(mcf/d)
4,760
5,250
9,097
6,042
9,741
Natural gas liquids production (1)
(boe/d)
1,635
1,820
993
1,644
958
Total production (2)
(boe/d) (3)
39,267
40,802
41,806
40,919
41,382
Total inventory balance
(bbl)
1,076,394
1,330,418
1,238,780
1,076,394
1,238,780
Brent price reference
($/bbl)
82.85
85.92
88.63
82.17
99.04
Oil and gas sales, net of purchases (4) (5)
($/boe)
75.76
78.48
82.60
72.93
91.39
Premiums paid on oil price risk management contracts (6)
($/boe)
(0.69)
(0.59)
(1.32)
(0.80)
(1.22)
Royalties (6)
($/boe)
(1.79)
(3.76)
(6.04)
(2.98)
(7.83)
Net sales realized price (4) (5)
($/boe)
73.28
74.13
75.24
69.15
82.34
Production costs (excluding energy cost), net of realized FX hedge impact (4)(5)
($/boe)
(9.69)
(8.82)
(8.48)
(8.76)
(8.79)
Energy costs, net of realized FX hedge impact (4)(5)
($/boe)
(5.06)
(5.04)
(3.08)
(4.49)
(3.35)
Transportation costs, net of realized FX hedge impact (4)(5)
($/boe)
(11.02)
(11.73)
(10.55)
(11.21)
(10.44)
Operating netback per boe (4)(5)
($/boe)
47.51
48.54
53.13
44.69
59.76
Financial Results
Oil & gas sales, net of purchases (7)
($M)
240,105
254,805
260,824
905,249
1,105,503
Premiums paid on oil price risk management contracts
($M)
(2,198)
(1,930)
(4,182)
(9,903)
(14,733)
Royalties
($M)
(5,683)
(12,216)
(19,076)
(36,949)
(94,709)
Net sales (7)
($M)
232,224
240,659
237,566
858,397
996,061
Net income (8)
($M)
92,038
32,582
197,796
193,497
286,615
Per share – basic
($)
1.08
0.38
2.29
2.27
3.16
Per share – diluted
($)
1.04
0.37
2.25
2.19
3.08
General and administrative
($M)
16,891
11,925
12,761
53,907
55,063
Outstanding Common Shares
Number of
Shares
85,151,216
85,431,716
85,592,075
85,151,216
85,592,075
Operating EBITDA (7)
($M)
121,036
137,800
144,994
467,219
641,877
Cash provided by operating activities
($M)
73,432
153,957
138,312
411,794
620,479
Capital expenditures (7)
($M)
82,292
74,130
134,165
442,734
417,563
Cash and cash equivalents – unrestricted
($M)
159,673
189,190
289,845
159,673
289,845
Restricted cash short and long-term (9)
($M)
30,300
32,048
23,202
30,300
23,202
Total cash (9)
($M)
189,973
221,238
313,047
189,973
313,047
Total debt and lease liabilities (9)
($M)
536,822
525,517
511,552
536,822
511,552
Consolidated total indebtedness (excluding Unrestricted Subsidiaries) (10)
($M)
430,170
409,853
407,808
430,170
407,808
Net debt (excluding Unrestricted Subsidiaries) (10)
($M)
318,092
271,508
178,534
318,092
178,534
(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 on page 44 of the Company’s MD&A for the fiscal year ended December 31, 2023 (the “MD&A).
(3) Boe has been expressed using the 5.7 to 1 Mcf/bbl conversion standard required by the Colombian Ministry of Mines & Energy. Refer to the “Further Disclosures – Boe Conversion” section on page 44 of the MD&A.
(4) Non-IFRS ratio (equivalent to a “non-GAAP ratio”, as defined in National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure (“NI 52-112” ). Refer to the “Non-IFRS and Other Financial Measures” section on page 27 of the MD&A.
(5) 2022 prior period figures are different compared with those previously reported as a result of the exclusion of Promotora Agricola de los Llanos S.A. (“ProAgrollanos”) revenues and, production and transportation costs.
(6) Supplementary financial measure (as defined in NI 52-112). Refer to the “Non-IFRS and Other Financial Measures” section on page 27 of the MD&A.
(7) Non-IFRS financial measure (equivalent to a “non-GAAP financial measure”, as defined in NI 52-112). Refer to the “Non-IFRS and Other Financial Measures” section on page 27 of the MD&A.
(8) Net income (loss) attributable to equity holders of the Company.
(9) Capital management measure (as defined in NI 52-112). Refer to the “Non-IFRS and Other Financial Measures” section on page 27 of the MD&A.
(10) “Unrestricted Subsidiaries” include CGX Energy Inc.(“CGX”), listed on the TSX Venture Exchange under the trading symbol “OYL”, Frontera ODL Holding Corp., including its subsidiary Pipeline Investment Ltd. (“PIL”), Frontera BIC Holding Ltd. and Frontera Bahía Holding Ltd. (“Frontera Bahia”), including its subsidiary Sociedad Portuaria Puerto Bahia S.A (“Puerto Bahia”). On April 11, 2023, Frontera Energy Guyana Holding Ltd. and Frontera Energy Guyana Corp. were designated as unrestricted subsidiaries. Refer to the “Liquidity and Capital Resources” section on page 33 of the MD&A.
Fourth Quarter and Full Year Operational and Financial Results:
The Company recorded net income of $92.0 million or $1.04/share in the fourth quarter of 2023, compared with net income of $32.6 million or $0.37/share in the prior quarter and net income of $197.8 million or $2.25/share in the fourth quarter of 2022. For the year ended December 31, 2023, the Company reported net income of $193.5 million, compared to net income of $286.6 million for the year ended December 31, 2022.
Production averaged 39,267 boe/d in the fourth quarter 2023 (consisting of 23,002 bbl/d of heavy crude oil, 13,795 bbl/d of light and medium crude oil combined, 4,760 mcf/d of conventional natural gas and 1,635 boe/d of natural gas liquids) compared to 40,802 boe/d in the prior quarter and 41,806 boe/d in the fourth quarter of 2022, lower production during the quarter was a result of lower planned drilling and workover activity in the fourth quarter, natural decline, and unplanned maintenance on an injector well in Quifa. In 2023, Frontera’s production averaged 40,919 boe/d (consisting of 23,359 bbl/d of heavy crude oil, 14,856 bbl/d of light and medium crude oil combined, 6,042 mcf/d of conventional natural gas and 1,644 boe/d of natural gas liquids), within the Company’s 2023 guidance of 40,000-43,000 boe/d.
Operating EBITDA was $121.0 million in the fourth quarter of 2023 compared with $137.8 million in the prior quarter and $145.0 million in the fourth quarter of 2022. The decrease in operating EBITDA quarter over quarter was primarily a result of lower commodity prices and lower volumes sold in the fourth quarter. Frontera’s weighted average Brent price was $81.88/bbl in 2023, generating $467.2 million of EBITDA.
Cash provided by operating activities in the fourth quarter of 2023 was $73.4 million, compared with $154.0 million in the prior quarter and $138.3 million in the fourth quarter of 2022. The decrease quarter over quarter was primarily due to changes in working capital mainly related to income taxes withheld, lower commodity prices and volumes sold.
The Company reported a total cash position of $190.0 million at December 31, 2023, compared to $221.2 million at September 30, 2023 and $313.0 million at December 31, 2022. The Company generated $411.8 million of cash from operations in 2023, compared to $620.5 million in 2022. During the year, the Company primarily invested $442.7 million in capital expenditures, including $153.7 million related to the Wei-1, $12.7 million related to the acquisition of the IFC interest on ODL, $56.9 million in net debt service payments and $5.9 million in share buyback.
As at December 31, 2023, the Company had a total crude oil inventory balance of 1,076,394 bbls compared to 1,330,418 bbls at September 30, 2023. As of December 31, 2023, the Company had a total inventory balance in Colombia of 551,715 barrels, including 322,639 crude oil barrels and 229,076 barrels of diluent and others. This compared to 812,797 as of September 30, 2023, and 683,416 barrels as at December 31, 2022. The decrease in inventory balance was primarily due to inventory drawn for export sales. Inventory balances in the fourth quarter related to Ecuador and Peru were 44,479 barrels and 480,200 barrels, respectively.
Capital expenditures were approximately $82.3 million in the fourth quarter of 2023, compared with $74.1 million in the prior quarter and $134.2 million in the fourth quarter of 2022. During the fourth quarter, the Company drilled 14 development wells at its Quifa SW, Cajua and CPE-6 blocks as well as one exploration well, Perico Norte-A4 on the Perico block in Ecuador. For the full year 2023, the Company executed approximately $442.7 million in total capital spending, including $157.3 million in total capital spending related to the Wei-1 well, within its 2023 capital guidance of $420-475 million and compared to $417.6 million in 2022.
The Company’s net sales realized price was $73.28/boe in the fourth quarter of 2023, compared to $74.13/boe in the prior quarter and $75.24/boe in the fourth quarter of 2022. The decrease in net sales realized price quarter-over-quarter was primarily driven by the decrease in Brent benchmark oil price compared with the previous quarter, partially offset by lower royalties. The Company’s net sales realized price in 2023 was $69.15/boe, compared to $82.34/boe in 2022.
The Company’s operating netback was $47.51/boe in the fourth quarter of 2023, compared with $48.54/boe in the prior quarter and $53.13/boe in the fourth quarter of 2022. The decrease in operating netback quarter-over-quarter was primarily due to a lower net sales realized price and, higher production costs, resulting from higher well services activity costs and higher energy costs. The Company’s operating netback for the year ended December 31, 2023, was $44.69/boe, compared to $59.76/boe in 2022.
Production costs (excluding energy cost), net of realized FX hedge impact, averaged $9.69/boe in the fourth quarter of 2023, compared with $8.82/boe in the prior quarter and $8.48/boe in the fourth quarter of 2022. The increase quarter over quarter was due to higher technical assistance and maintenance costs, partially offset by lower cost associated to well services activities. Frontera’s total production costs, including energy cost, net of realized FX hedge impact, averaged $13.25/boe in 2023, within the Company’s 2023 guidance range of $12.50–$13.50/boe.
Transportation costs averaged $11.02/boe in the fourth quarter of 2023, compared with $11.73/boe in the prior quarter and up from $10.55/boe in the fourth quarter of 2022. The decrease during the quarter was mainly due to an increase in local sales volumes to the thermal market. Frontera’s transportation costs averaged $11.21/boe in 2023, within the Company’s 2023 guidance range of $10.50–$11.50/boe.
Total ODL volumes transported were 252,810 bbl/d during the fourth quarter of 2023, up 13% versus the fourth quarter of 2022. Total volumes transported through ODL for 2023 were 243,617 and received capital distributions of $47 million during the year.
Puerto Bahia liquids volumes were 52,754 bbl/d during the fourth quarter down 21% compared to the third quarter of 2022, driven mainly by lower imported crude volumes, and 60,718 bbl/d for the full year 2023 compared to 62,422 bbl/d in 2022. Puerto Bahia liquids revenues were $7.6 million during the fourth quarter, up 12% compared to the fourth quarter of 2022, mainly due to higher tariffs. For the full year 2023, Puerto Bahia liquids revenues were $32.1 million compared to $29.6 million in 2022, mainly due to higher tariffs.
Adjusted Infrastructure EBITDA in the fourth quarter of 2023 was $30.7 million, compared with $26.6 million in the fourth quarter of 2022, and $119.8 million for the full year 2023.
In the Company’s exciting Guyana Exploration business, the discovery of 228 feet of net pay in Kawa-1 and 114 feet of net pay in Wei-1, on North Corentyne was confirmed. Results further demonstrate the potential for a standalone shallow oil resource development across the Corentyne block.
Total costs associated for the Wei-1 well are now estimated to be $189 million following the successful implementation of several cost saving initiatives. Frontera’s direct and indirect WI in the Corentyne block is estimated at up to 72.52% and 93.42%, respectively.
During the fourth quarter of 2023, the Company repurchased for cancellation 280,500 Common Shares at a cost of approximately $1.7 million.
Frontera announced the results of its annual independent reserves assessment for the year ended December 31, 2023, conducted by DeGolyer and MacNaughton Corp (“D&M”) in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook maintained by the Society of Petroleum Evaluation Engineers (Calgary Chapter) (the “COGE Handbook”), National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) and CSA Staff Notice 51-324, and are based on the Reserves Report (as defined below). All of the Company’s booked reserves for the year ended December 31, 2023, are located in Colombia and Ecuador.
Key Highlights:
Added 4.2 MMboe of 2P gross reserves, for total Company 2P gross reserves of 164.1 MMboe consisting of 64% heavy crude oil, 24% light and medium crude oil, 8% conventional natural gas and 4% natural gas liquids, compared to 174.8 MMboe at December 31, 2022.
2023 year-end gross proved developed producing reserves increased by 2% to 40.0 MMboe and the proved developed producing reserves replacement ratio was 105%.
Delivered three-year average gross PDP, 1P and 2P Reserves Replacement Ratio of 129%, 104% and 79%, respectively.
Reserves Replacement Ratio (%)
PDP Reserves
1P Reserves
2P Reserves
2021
133 %
175 %
131 %
2022
150 %
52 %
77 %
2023
105 %
85 %
28 %
Three-year average
129 %
104 %
79 %
Delivered a 1P gross reserves life index of 7.3 years compared to 7.4 years at December 31, 2022, and a 2P reserves life index of 11.0 years compared to 11.6 years at December 31, 2022.
The NPV of the Company’s 2P reserves, discounted at 10% before tax, is $3.5 billion ($21.60/2P boe) at December 31, 2023, compared to $3.7 billion ($21.24/2P boe) at December 31, 2022. The decrease in NPV10 for the 2P reserves is primarily due to a decrease in the forecast oil price used to calculate the NPV10, however the NPV10 per boe increased by 2% driven by operational efficiencies and reduced future development costs.
Reduced the future development cost for 2P reserves by $300 million to $1.2 billion at December 31, 2023, compared to $1.5 billion at December 31, 2022. The reduction is primarily due to the Company’s focus on sustained production, value over volumes and an optimized development plan.
2023 Year-End D&M Certified Gross Reserves Volumes(1)
Reserves Category
December 31, 2023
Mboe(2)
December 31, 2022
MBoe (2)
Percentage Change
2023 versus 2022
Proved Developed Producing (PDP)
39,976
39,287
2 %
Proved Developed Non-Producing (PDNP)
7,864
9,951
(21 %)
Proved Undeveloped (PUD
60,889
61,774
(1 %)
Total Proved (1P)
108,729
111,013
(2 %)
Probable
55,363
63,752
(13 %)
Total Proved Plus Probable (2P)
164,092
174,765
(6 %)
Possible (3)
36,563
43,770
(16 %)
Total Proved Plus Probable Plus Possible (3P)
200,654
218,535
(8 %)
(1) Gross reserves represent Frontera’s W.I. before royalties.
(2) See “Boe Conversion” section in the “Advisories”, at the end of this press release.
(3) Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.
Frontera achieved 108% of its 2023 Sustainability Goals, started the operation of its first solar farm (Ikotia) in December that will reduce almost 8,000 TCO2e from the power generation in CPE6 in 2024 and offset 50% of its scope 1 emissions. The Company also completed 5,737 cumulative hectares preserved and restored in key connectivity corridors in Casanare and Meta (Colombia) and recycled 45% of its operating water and 12% of its solid waste. Frontera handed over 1,000 hectares to the National Parks Association in Colombia, which contributed to the declaration of the Serranía de Manacacías as a National Park in Meta, a major environmental milestone for the country.
The Company invested approximately $5.5 million in education, including economic development, and quality of life initiatives, benefiting 94,875 people through 256 social projects in Colombia, Ecuador and Guyana. Frontera purchased $73.3 million worth of goods and services from local suppliers in nearby operation areas. In 2023 Frontera was included in the Bloomberg Gender-Equality Index (“GEI”) and was recognized for the fourth consecutive year as one the most ethical companies in the world by the Ethisphere Institute.
Since 2018, Frontera has returned more than $306 million to shareholders through dividends and share buybacks while maintaining a strong balance sheet.
NCIB: Under the Company’s current NCIB which commenced on November 21, 2023, Frontera is authorized to repurchase for cancellation up to 3,949,454 of the Company’s common shares (“Common Shares”). As of March 7, 2024, the Company has repurchased approximately 624,600 Common Shares for cancellation for approximately $3.7 million.
Dividend: Pursuant to Frontera’s dividend policy, Frontera’s Board of Directors has declared a dividend of C$0.0625 …
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