Q3 2023 Frontera Energy Corp Earnings Call
Good morning, My name is Sylvia and I will be your conference facilitator today welcome to Frontier Energy's third quarter 2023, 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 to audio webcast on the company's website.
There will be time for questions. Following the speakers remarks analysts and investors are reminded that any additional questions can be directed to the company at IR at Frontera Energy Dot C E.
This call contains forward looking information within the meaning of applicable Canadian securities laws relating to activities events or developments. The company believes or expect 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.
Although the company believes the assumptions are reasonable forward looking information is not a guarantee of future performance.
We're looking information is subject to several 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 30th 2023, and the company's annual information form dated March 1st 2023, and other documents filed from time to time with Securities regulatory authorities describes the risks uncertainties.
Oh 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.
I would now like to turn the call over to Mr. Gary L. D Alba chairman of the board of Frontier energy.
Thank you operator.
Morning, everyone welcome to <unk> third quarter two included three earnings call.
Joining me on today's call are Orlando Cabrera, Please do that.
CEO and ready to bluegrass from pellets CFO.
Also available to answer questions at the end of the goal.
Victor Vega.
Field development reservoir management and exploration.
We had double media General counsel.
I know they have a little VP operations.
And will that pick up, but you know you'd be marketing logistics and business sustainability.
As Dennis three core businesses continued to deliver solid performance.
And the company is Colombia, and Ecuador upstream onshore business.
Without your cost operating EBITDA and Capex.
In 'twenty three guidance at $80 per barrel average Brent price for the year.
The company delivered strong operational and financial results and increase total cash position.
The restricted cash to $231 million as of September 30.
In this potentially transformational Uganda exploration business.
There are joint venture partners T J X energy announced the discovery well.
342 feet 104 meters over mid Bay.
The current time.
Fearing a significant potential of the quarantine block.
With the joint venture towards drilling program now complete the joint venture with support of Houlihan Lokey.
All of the investment banking capital markets experts.
Actively pursuing strategic options.
Potentially transformational Guyana exploration business.
Creating a potential farm down.
Progressive sheets efforts to unlock value with potentially transformational investments in Guyana.
It is a standalone and growing Columbia midstream business.
Income increased 14%.
Order.
And break constructed activities have begun an important pipeline connection between front desk, whereas the barilla liquids terminal.
The hidden their refinery.
First of all yeah, we'll build.
Rate and maintain the $6 eight kilometer 80 niche bidirectional hydrocarbon flow line, which will have a nominal capacity.
<unk> thousand barrels per day.
A connection will be capable of handling imported and domestic any produced crudes I'd rather hydrocarbons.
Importantly, during the quarter the.
The company continued to drive cost out of the business, reducing our G&A by 4%.
On this positive momentum as to better position the company for sustained long term success.
Subsequent to the quarter.
The board of directors approved.
Our performance improvement plan.
That will improve organizational.
Good.
Operational efficiencies.
Reduced operating costs and better align the company's workforce with current business needs published.
The strategic priorities and key growth opportunities.
But then.
We'll conduct again and in CIB to permit purchases of up to 10% or you're just spending float.
I'm excited about the strong performance from from Paris beauty businesses.
Tangible steps the company is taking.
And he has value for your shareholders.
I'll now turn the call Albrecht Orlando Cabrera.
Our CEO and our CFO render borders.
Sure the abuse of Entellus third quarter results and the performance of our three core businesses Orlando.
Good morning, Thank you Robert and good morning, everyone.
So there are the Heber positive third quarter results.
Year to date, our daily production cost arbitrage.
41470 <unk>.
Okay.
Compared to the same period last year, we increased our heavy oil production by 50% viewing.
You in part to increased water has been an increase.
Natural gas liquids production by 100% compared to the same quarter last year.
Our CPC, we delivered record quarterly production of 5803 <unk> per.
To date.
13% quarter over quarter.
It won't be relevant drilling.
New flow line and expanded facility.
<unk> also recently achieved record daily production of 6435 hours per day.
Capital spending for the quarter.
74.
$41 million, primarily to drill 14, before well Ah Kee Parker, who arent CPC.
Last one exploration well in the eco blocking it.
The company has also invested in new flow lines, either keep a block to connect with this project and have also invested in improved development activities.
<unk> water handling capacity in the <unk> block.
Taking a closer look at our three core businesses.
In our Colombia, and Ecuador upstream business.
Data produced 40150 Boe's per day from its Colombian operations.
We currently have.
Three drilling rigs and three workover rigs active our key city blocks in Colombia.
I think I have mentioned before increasing water handling capacity is key to compare us effort to grow production on it Keith.
Our current water handling capacity is approximately 1.6 million borrowers with water per day.
During the third quarter.
Data continue re commissioning efforts at Scioto.
Reverse osmosis water treatment facility.
Which has nameplate capacity of up to 1 million barrels of water per day.
As of October 2023.
<unk> had process $16 3 million barrels of water as part of its re commissioning toga.
Providing irrigation source water to the company.
Nearby drug we began those palm oil plantations.
The company is actively engaged in discussions with Ecopetrol to permanently green decider facility online under terms mutually acceptable to both companies.
In the Guadalajara Frontera Sheriff reduction was 652 barrels per day of medium crude oil compared to $613 per day in the prior quarter.
On the compare operated Rico block.
We drilled the eco central one well during the quarter.
With oil down in <unk> and <unk>.
Sure.
Delivering our production of approximately 800 barrels per day of 28 degrees API medium crude oil.
The company believes that the upper or pursuing additional exploration and production opportunities.
With the completion of 300 D. These are the political central one well.
Anyhow satisfy its four well exploration commitment on the block.
In addition.
The eco mod.
Four well was completed on November 4th of this year.
Initial production rates.
Ultimately 1200 gallons per day of $29 four degree API crude oil.
The company continues to conduct long term testing at 131 and G. One exploration wells.
If preparers.
Our winter impact assessment in advance of obtaining production environmental license.
Turning now to the midstream Colombian business.
We continue our efforts to unlock shareholder value from these core businesses.
We have been on Gary's comments about the preconstruction activities.
Our between portable I yet again.
Once in service declination will enable continuous transport of crude oil and other type of cargoes between both.
<unk> facility and the Cartagena refinery.
Since the announcement in our 2023 the connection point has already achieved.
Notable technical environmental social financing and procurement and boxes.
I would like to thank our partner.
He got on Ecopetrol for the dedication to completing the connection agreement with Wes I look forward to exploring the full potential of the connection in the coming months and years.
Regarding our midstream business results.
Total OBO volumes wanted.
Approximately 252000 barrels per day in the third quarter up 17% compared to the third.
I think last year.
Although by Yahoo.
Liquid volumes were approximately 54000 barrels per day.
In the third quarter down, 11% compared to the third quarter of last year.
Mainly by lower imported crude volumes.
Do I hear liquids revenues were $78 million, leaving the third quarter up.
1% compare to third quarter 2020.
Mainly due to hydro titles.
Adjusted Midstream EBITDA.
<unk> was $29 $9 million compared with $17 6 million in the <unk>.
Second quarter.
Third quarter of last year.
Before turning the call over to Damian I would like to.
These calls our <unk> exploration business.
I think joint venture announced yesterday, we have discovered a total of 140 feet 35 meters of net pay.
Wade one well.
And our total net sales of 342 feet.
There are four meters discovered to date on the positive block.
Approximately 200 kilometers offshore from Georgetown Guyana.
The wave one well targeting the <unk> companion as Antonio H taxon, we can channel and fund complexes in the northern section of the correcting block.
As reported on June 28 of this year the gate data acquisition program at the <unk>, one well in kindred wireline bogey.
Samples and sidewall coring levels at various intervals.
Based on these data acquisition program and additional information provided through the independent laboratory analysis processes. The JV is pleased to report before.
In demonstration.
Wave one test results confirmed 30 feet of net pay and high quality sandstone reservoirs.
Quality and all that goes with that reported in the Liza discovery on a stock broker block.
Two examples with three big NIM accretion analysis confirms.
The presence of sweet medium crude oil with a gas oil ratio of approximately 400 expand equity cheap.
No.
These results.
Almost right the potential for a standalone shallow resource development across the currently block.
In the companion Petro physical aggregate confirmed 61 feet of net pay almost completely contain one contiguous.
John body with good porosity, a movable oil.
Or is that all samples will NTT testing as well as samples analyzed downhole confirms the presence of light crude oil.
In this Antonio strategic or how do you just confirmed 40 feet of net pay blocky sand with indicators all equal samples.
Although according to reputation of the convenience Antonio poisons.
Joe Lawler for a little bit on the high quality must region. The JV believes these formations may offer additional upside potential in the future.
There were no safety or environmental reviews to wait one or operations.
As is normal course following discoveries.
Such as those made by the JV at weight and Cowen additional appraisal activities will be required before commercial it can be determined.
Total costs associated with the way one well are now estimated to be would be $185 $190 million.
Following the successful implementation of several.
Initiatives.
By not working interest calculation with our JV partner will be determined in December of this year after close out.
<unk> one.
I would now like to turn the call over to Rene <unk> CFO.
Okay.
Thank you Orlando and.
Good morning, everybody. Thank you again.
On our call.
The interest in our company and yard work.
I'd like take a moment to highlight a few.
Key financial aspects of our capital.
Paul.
In the third quarter the company reported net income of roughly $33 million.
The company's third quarter net income included in.
Operating income of $64 million.
Shoving them, but hasn't yet our investment.
A $40 million.
Partially upset by finance expenses of $60 million and total income tax expenses of $33 million.
This loss expense included a 10 and our tax provision related to certain 2020.
Operating EBITDA for the quarter was approximately $138 million.
This compares to $116 5 million.
Correct.
An 18% increase in quarter over quarter operating EBITDA.
Primarily as a result of higher Brent oil pricing.
<unk> improved differentials during the quarter.
Partially offset by higher production and transportation costs.
Drilling down on our operating costs, our operating and transportation cost per barrel during the quarter totaled $13 and 86% and $11 73 times respectively.
This compares with $11 in 'twenty.
And $10 77 in the prior quarter.
Year to date, our production and transportation cost per barrel.
$12 77.
And $11 2007, respectively.
This compares with $12 34.
$10 40 in the prior period.
The increase in production costs year over year was primarily a result.
Shanghai pressures the impact of FX volatility.
The occupancy cost higher fuel consumption, partially upset by lower oil prices.
On the transportation side.
Higher cost associated with the annual increased interest for <unk> Tec.
The impact of FX volatility.
And highest reported volumes, resulting from the company.
This quarter, we have presented our production and transportation indicators to capture the impact our FX hedging activity, which are critical components of upon the exercise.
FX hedging positions have contributed to an $80 per barrel and 20 stop about benefit on our production and transportation cost respectively.
I will provide more information on our hedge activity in a minute.
Adding to our chairman's comments and consistent with our restructuring plan, we remain committed to driving down costs out of our business.
On the operating cost front.
Down focus on cost control and continuously review.
But this interactively and enacting cost saving measures.
Moving on cash generation for the quarter was strong.
Cash flows from operations totaling $154 million.
Compared with a 100 day $184 million in the prior quarter.
Cash generation from operating activities remained strong due to stronger quarter over quarter, Brent oil prices as well as $64 million and income tax recovery.
After the third quarter the company reported a broadcast decision up $221 million.
101 million of unrestricted cash.
Up three 5% compared to $214 million after the second quarter 2023.
Wrapping up I would like to provide an update on <unk>.
2022 expanding our financing effort, our risk management strategy and our proposed JV program.
Complementing along those comments cost associated for the Weibo well are now estimated to be within 185 and $180 million.
This model is the segment that addition of several cost reduction initiatives.
Cash outflows remaining two <unk> exploration program.
Quarter are expected around $15 million to $20 million.
Additionally, <unk> is indirect working interest will vary between $93 three at 93, 4% with final working interest calculations to be determined in December 'twenty three as we close out we went to our operations.
We continue our efforts to grow our liquidity and funding alternatives.
During the quarter the company borrowed $80 million under a new one year working capital loan facility with Bancolombia.
The company concurrently repaid in full if attending $12 million Alan on the <unk>.
Getting that working capital alone.
Of this year.
Additionally, and subsequent to the quarter. The company time subsidiaries, an LOI with Macquarie Bank to fund the $30 million accordion in relation to the quite the way I think our collection.
We greatly appreciate all of our banks efforts and support.
Onto our current risk management strategy.
Our strategy continues to show a car hedging discipline is supporting of operations and planning.
These derivative instruments to manage exposure to oil price and FX volatility.
On the oil side the company entered into new plus approximately one 5 million barrels would put averaging $79 $79 per barrel, but helping protect approximately 40% of the company. After royalties estimated production for December <unk>.
Only 20%.
So instead of hot cocoa enter into foreign exchange rate hedges totaling $180 million.
While approximately 40% of our estimated peso exposure.
For the fourth quarter and through the first half of 2024.
Instead, it provides the company with disability and will help mitigate future fluctuation and all the different daughter unstuck.
Lastly from a shareholder standpoint for bearing with us to implement a normal course issuer bid.
To permit the purchase of up to 10%.
Alright proximately three.
Sure Pierre.
You May go ahead with it.
Subject to the approval of the effect.
And with that I think my part is completed I would like to turn it off to Orlando for example.
Thank you.
Before I wrap up todays call I would like to highlight that during the quarter we achieved.
Our total recordable ECM grade of <unk> 49.
Which is the best safety performance in company history.
With all of our our objective for the ear of only 74.
Also during the quarter protected reserve 1367 hectares of land in the <unk> monarch Ics Park in two areas.
And when combined with our station client gains on sustainable use projects. The company has exceeded its goal of 1000 hectares.
For the year and totaling close to 6000 hectares per server.
The company also recycle 41, 4% of water use use operations.
And as I've said, 33% of its Colombia.
And this shows through the purchase of cargo crates.
Eileen cranial proud of the entire front therapy for the vacation to safe and responsible operations.
With that I would like to conclude by saying Thank you.
Many of the comments. Thank you everyone for attending our call.
I'll now turn the call back to our operator, who will open the call up for questions.
Thank you, Sir ladies and gentlemen, if you would like to ask a question. Please press star followed by one on.
You touched on the phone.
You will hear a three ton prompt acknowledging your request and.
If you would like to withdraw from the question queue. Please press star followed by two.
And if you are using a speaker phone you will need to lift the handset before pressing Andy Keys. Please go ahead and press Star one now if you have any questions.
Standby, while we compile the Q&A roster.
Yeah.
Once again, ladies and gentlemen, please press star one at this time, if you do have any questions.
And your first question will be from Mr. Konstantin Boom Cowen. Please go ahead.
Good morning.
Yes.
Questions for you I'm trying to give them to you all upfront.
And the order you guys want to answer that Matt.
So I think the first wanted to thank everyone is asking is in terms of the press release that was filed.
Could you could you please get closer to your thoughts as we're having trouble hearing.
Hey, Sean.
Okay is this better.
Yes.
Okay. Okay.
Okay very good. Thank you, yes. So the first question I think as everyone is asking at the moment is what happened in terms of the same Tony and assessment between June press release, finally, we're saying 210 feet of hydrocarbon bearing sands in the San Antonio.
Now, we're seeing 40 and way so that's the first question I guess.
The next couple of questions are more related to the process youll be running.
Such as what types of entities have been reaching out for <unk>. What is your plan of houlihan as an.
Unsuccessful and I guess.
Another question is in terms of bluefin and high morale.
If those are successful results what do you expect.
<unk> will do for you.
Their plans and then I guess the last question is.
In terms of the CIB.
The reason why we chose to do and in CIB versus a modified Dutch auction.
Did that in the previous year or two.
Those are my questions.
Yeah.
Okay.
I've got three questions.
The first one.
Victoria can you hear me okay.
Okay.
Okay. So basically the first question are you asking me about what is it.
Yes.
We.
Hydrocarbon bearing sands.
Polishing the previous press release, and then we are releasing right now.
As probably you know.
We mentioned hydrocarbon bearing that's basically a total loss that you see in the in the well we love the way that we go through it.
All the data and what you do after that is customary.
Nothing new.
You actually incorporate a nitpick calculation, which is based on some growth property cutoffs that you used which is basically therefore getting after leaving the cutoff that I use.
The type of work that you have that you have.
Consistent with the evaluation of the two wells.
And we will.
Is it the opinion.
So what we did was we took all of that volume and then we took it out of all of that bogie that you have had a terrible Barrington, we get cutoff that we use the information that we got through the quarter, which is the reason why we did not use the number at the time.
Like in the core data when we looked at that and that was the result came out so it's basically that Nathan Oh man.
Detail that you get in any kind of analysis of these China either way.
When you go to the world.
The volume split Asia with hydrocarbon basins, and then you go into a more refined number which is then you see some of the clubs.
Yes.
On your question about.
The European Kingdoms.
We have lots of engagement.
I think I think the first thing that I would reiterate is that we.
We remain very excited about the results.
Thank you Kathy.
In my remarks.
That we sold to the Indian arbitration demonstrate.
South Florida.
I'll leave that alone.
Audio.
We saw a whoever wins in.
In the block.
We remain very excited about that and the fact that we.
Yes.
H.
The 49 luxury boutiques, which is.
A leading investment bank.
Yeah.
No for strategic options, including a potential farm down you can think of.
All of that excitement.
Based on the results that we that we have.
We are getting ready and preparations for launching a potential process, but but I wouldn't I wouldn't take any any any more on that.
So Brady.
Okay.
Hello.
We have.
The next question was on the MTA the modified.
Okay and antibody program is very good.
Before you answer it.
We're excited about launching the program.
We have the liquidity for the stock and that does not exclude any other contract vehicles.
On discussion with the board.
What is the time.
Yes. His approval, we would like we would likely be kicking it off it.
Okay. Yeah, I appreciate you're responding to that I guess, one more question kind of relation all of that is there going to be an updated resource reports using all the information you now have.
And what you think the potential is there.
All of the.
Targets I guess potential targets.
Okay.
Your question is in relation to our interest before or or or.
We are.
Okay, we will delivery because before our Colombian operation.
And when we get to that probably in February will probably come to the market that as it relates to our everything we didn't think that you've been very clear we are launching our farm down process.
Chris I appreciate the help with Lucky.
Thank you.
So our metrics.
We are we actually we never I mean, we never intended to apply a resale.
We saw crude oil at this point okay.
Okay.
I mean Canadian patients or various III in terms of disclosing any any numbers, which has to be validated by a third party.
A specific methodology. So we never intended to rationally what we have been doing is analyzing all the data that we got which was I asked.
Significant amount of data so it has taken.
That is what we expected.
I mean, they're excited about what we what we found.
I look forward for the for the next if they can be it can be done.
Okay, well I appreciate it thank you for taking my questions.
You're welcome.
Yes.
Operator.
At this time, we have no questions later, we.
No other questions. Please proceed.
Yes.
Sure.
Okay.
Yeah.
Yeah.
We have no other questions that you may proceed with any closing comments.
Yeah.
Thank you operator. Thank you. Thank you for organizing the goal. Thank you everyone for attending the call.
Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines have a good weekend.
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