Q1 2025 Frontera Energy Corp Earnings Call
Sergio: Good morning, my name is Sergio and I'll be your conference facilitator here today. Welcome to Frontera Energy's first quarter, 2025, Operating and Financial Results Conference call.
Sergio: All lines are currently on mute to prevent any background noise. I would like to remind you that this conference call is being recorded today and is also available through an audio webcast on the company's website.
Sergio: Following the speaker's remarks, there will be a time for questions. Analysts and investors are reminded that any additional questions can be directed to Frontera following today's call at iratfronteraenergy.ca
Sergio: This call contains forward-looking information within the meaning of applicable Canadian securities laws relating to activities, events, or developments that company believes or expects will or may occur in the future.
Sergio: For well-located information, reflects the current expectations, assumptions and beliefs of the company based on information currently available to it.
Sergio: Although the company believes the assumptions are reasonable, for what looking information is not a guarantee of report.
Sergio: for well-looking information is subject to a number of risks and uncertainties that may cause the actual results of the company to deform materially from those discussed in the for well-looking information.
Sergio: The company's MDNA for the quarter ended March 31st, 2025 and the company's annual information form dated March 10th, 2025 and other documents it files.
Sergio: From time to time, which securities regulatory authorities distract the risk, uncertainties, material assumptions, and other factors that cause influence actual results.
Sergio: 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.
Speaker Change: I will now look to turn the call over to Mr. Gabriel Alba, Chairman of the Board of Frontera Energy. Please go ahead.
Speaker Change: Thank you, operator. Good morning, everyone, and welcome to Frontera's first quarter 2025 operating and financial results conference call.
Speaker Change: Joining me on today's call are Orlando Carales, Frontera CEO , Renee Burgles Diaz, Frontera CFO
Speaker Change: also available to answer questions at the end of the call
Victor Vega: We have Victor Vega, VP, Field Development, Reserve Work Management and Exploration, Alejandra Bonilla, General Council, Ivan Arevalo, VP Operations.
and Renata Campanero, VV Marketing, Logistics, and Business Sustainability. Thank you.
Thank you for joining us.
Victor Vega: Frontera remains focused on the delivery of its strategic objectives and generating value for shareholders.
Victor Vega: In the first quarter, the company generated 83.5 million in operating EBEDA.
Recorded 27.5 million in net income.
13.6 million in income from operations [inaudible]
Victor Vega: Produced 28.6 million of adjusted infrastructure Ibeda and maintained a strong balance sheet finishing the quarter with a total cash balance of 199.8 million.
Victor Vega: The board is advancing on the strategic path for maximizing shareholder value.
including on the infrastructure assets. [inaudible]
Victor Vega: The next step is through the recapitalization of its investments in the ODL pipeline through a new 220 million non-recourse secured loan and the development of key growth projects at Puerto
Victor Vega: The recapitalization will deliver approximately 115 million in process to Frontera today.
Victor Vega: After the refinancing of existing debtless, while maintaining future upside potential from this key transportation asset in Colombia.
Importantly, the financing excludes Puerto Vallilla from the Security Package. [inaudible]
Victor Vega: providing for Tobaya greater flexibility to secure independent financing for new strategic growth projects.
Victor Vega: We would like to thank Goldman Sachs for their advice as the board reviewed various alternatives.
Victor Vega: from there remains open to consider all options to surface the value of its assets and enhance your older body.
Victor Vega: including potential future strategic transactions involving its infrastructure business which include the potential L&D import facility in Porto Bahia.
regarding the ODL recapitalization.
Victor Vega: announced that it intends to commence a substantial issue bid to purchase up to 65 million of the company's outstanding shares.
Further?
Victor Vega: The company has also launched this morning a 65 million cap, tender and consent solicitation for its 2028 senior and secure knows.
Victor Vega: These efforts are consistent with the company's strategy of returning capital to its stakeholders.
The company is also declaring it's quarterly dividend.
Victor Vega: of 0.0625 cents per share or 3.5 million in aggregate, and plans to commence its NCAB program once the announce, substantially your bid is completed.
Victor Vega: Assuming full of take of this SAP and CapTender, the company will have returned 190 million to its stakeholders since 2024, to normal course issue bits, substantial issue bits, declared dividends, and won bybacks.
Victor Vega: Looking ahead, container will continue to consider similar investor-focused initiatives in 2025 and beyond
Cher, or Boned Bye-Bye
Victor Vega: Based on the overall results of the business, all prices, and the company's casual generation.
Victor Vega: Additionally, the company will consider all options to enhance the value of its common shares in the short term, and in so doing, may consider other strategic initiatives or transactions.
Speaker Change: I'd like now to turn the call over to Orlando Cabrales, Frontera CEO , and René Burgos, Frontera CFO , who will share their views on our first quarter results.
Orlando,
Speaker Change: Gabriel, good morning, everyone. I thank you for joining us for today's call.
YouTube delays in the heavy oil assets drilling campaign.
Lower than expected water of handling at Sara.
Speaker Change: National Decline, as well as greater need of well interventions in our lives and medium blocks.
that half-seize being addressed.
Speaker Change: You in part to increase 100 volumes to 133,000 dollars per day at our SAARA water treatment plant.
Speaker Change: The company remains confident. It will deliver its full-year hours production guidance of 41,000 to 43,000 B.O.E. per day.
Speaker Change: During the first quarter, the company drilled 13 development wells at Aguilva and CP-6 blocks in Colombian and completed well-well
Speaker Change: On the exploration front, our focus renamed on the lower Mardalena Valley and Janos Basins in Colombia during the first quarter [inaudible]
Speaker Change: At the Cachicamo block, we finish drilling the Papillo one well and is currently producing approximately 130 B.o.e. per day.
Speaker Change: and we also finished reading the Greta not the one well in February , which was being not commercial and the well will be blocked by the band.
at the big one block.
Speaker Change: Discussions with authorities and communities continue ahead of drilling the either at one well in the second half of this year.
Speaker Change: In addition, the company is also engaged in print seismic and print railing activities related to social and environmental studies in the Jan. 99 and being 46 blocks.
Speaker Change: In Ecuador, at the Stereo Block, the Stereo Sur B3, well, remains on long-term tests and is producing 380 barrels per day across.
The company continues to evaluate development options.
Speaker Change: Given the current lower oil price environment and the lower market volatility, we remain focused on the things we can control.
Speaker Change: Our strategy ensures that we have a stronger, profitable, and more resilient company.
Frontera is proactive by identifying additional operational improvements.
Reducing Capital Expanding [inaudible]
and seeking greater cause and process efficiencies across our business.
while delivering our production targets and optimizing cash flow generation.
in our standalone and growing Colombian infrastructure business.
which includes the company's interest in audio.
We generated adjusted infrastructure see-be-done of $28.6 million during the quarter.
Speaker Change: ODL transported over 236,000 miles of oil per day and declared a 151 million dollars dividend.
52.9 million net of Rontera
10-50% of this amount in March, 2025.
Speaker Change: These results highlight the strong current generation capacity of our strategic infrastructure in business.
Speaker Change: Porto Aía, we will make focus on starting up the Refical Connection Project.
Speaker Change: With construction effectively complete, we aim to transport our first modules through the connection in the third quarter of this year.
Ongoing Desmond in the Port
Speaker Change: including LPG, JV with Gascoye, President Gascoye, are progressing as planned.
Speaker Change: Additionally, we are also reviewing new investment opportunities to leverage the ports and strategy location, existing facilities.
and Infrastructure Buildout Options.
for Providable Long-Term Growth, Social Potential, Energy Import Facility.
Regarding our Guyana exploration business
on March 13 of this year.
Speaker Change: The company and CDX announced the receipt of a communication from the government of Guyana, indicating that the government was terminating the petroleum agreement and canceling the PPL for the collective block of Choronganyan.
Speaker Change: On March 26, 2025, Frontera sent a notice of intent to the government of Guyana alleging breaches of the United Kingdom Guyana bilateral investment treaty and the Guyana Investment Act by the
Speaker Change: The notice of intent initiated a three-month period for consultations and negotiations between the parties to resolve the dispute amicably.
Speaker Change: The JD remains firmly on the view that its interest in the quarantine block remains in praise and in good standing.
Speaker Change: Shoot the parties, not reach a mutually agreeable solution, the JV and its other stakeholders are prepared to assert their legal rights.
Speaker Change: Mr. at the end of this quarter, we sign a commitment letter for a 220 million non-recourse secure financing supported by Frontera's indirect interest in audio and expect to enter into definite agreements shortly.
Speaker Change: The rocket utilization will allow us to distribute value to our investors while maintaining the upside of this key asset in Colombia.
Speaker Change: I now like to turn the call over to Rene Burgos, Frontera, CFO [inaudible]
Thank you, Orlando, and thank you, Gabriel.
Speaker Change: and good afternoon, everybody. Thank you as always for your interest and support of the company.
Speaker Change: I'd like to take a moment to highlight a few key financial aspects of our quarterly results.
[inaudible]
Speaker Change: For the first quarter, the company recorded an income of $27.5 million or $35 cents per share.
Speaker Change: The company's income includes roughly 13.6 million of operating income and 15.1 million from share of income from associates, the OVO investment.
Speaker Change: These were passed up primarily by approximately 26.6 million in different income tax expense and 17.3 million in final six doses.
Speaker Change: Paul Perri, the death of the quarter, was approximately $80,000,000,000, compared to $113,000,000,000 in a pair of quarter. This is primarily the result of lower self-volume partially offset by slightly higher front persons. [inaudible]
Speaker Change: I would like the moment to talk about our key per barrel indicators associated to a realized
During the quarter, our weighted average print sales price was $74.35 [inaudible]
$5.44, Nistria Quarter, and a $1.00 per barrel reduction.
Speaker Change: Looking at half, we continue to see a healthy appetite for the company's screwards, seeing the potentials for the company's barrels lower by over $2 from the Q1 levels.
Speaker Change: Versus Krutner-Margin, associated to our delusion in transportation programs was $3.71, higher in the $3.42 for the fair quarter.
Speaker Change: The Puerto Ravarians was a result of increased demand for development and fuel use for energy and lower volumes covered from her light and medium group of production.
Speaker Change: Taking a closer look into our operating costs, our production, energy, and transportation cost per barrel for the quarter total $27.74 [inaudible]
Speaker Change: This compares to $24.30 for the prayer quarter and $26.87 for Q1 2024.
Speaker Change: The increased quarter of a quarter production cost was primarily a result of the impact of lower quarter of a quarter production, as well as higher well intervention activities during the quarter.
and Fire Interview Prices.
Speaker Change: Transportation got an increase. I saw one of the increased tariffs for the offensive pipeline and trucking.
Speaker Change: on an infrastructure business. Orlando highlighted, I'll just leave it down for the quarter with 28.6 million. This compares to 27.5 million in the fourth quarter.
Speaker Change: The quarter-over-quarter increase was re-embed positively in the other segment due to the pipeline tariff increase and lower cost during the quarter-end.
Speaker Change: OJ Abalones transported work 236,000 miles per day, consistent with the previous quarter volumes.
Speaker Change: Respect to our capital expenditures, total copies for the quarter was 46.7 million lower than both Q4, 2024 and Q1, 2024 levels.
Speaker Change: Our graphics included is really a 13 development well in KEPA and CP6 and will
I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry
Speaker Change: Suála, two more exploration worlds in Colombia, Adecasica, Mordor, Aziz Cos, Paramelo Adecasica, Rene Diaz,
Speaker Change: and so Mark's already first 2025. The company reported a total cash provision of $199.28 million, including $171.1 million unrestricted cash and cash equivalent.
Speaker Change: Sering known to risk management, our current risk management strategy supports our operations and planning from Darry uses derivative instruments to manage exposure to oil prices and effects of hostility.
Speaker Change: On the oil side, the company has entered independence, successfully securing up to 40% heading ratio until June 2025, any 20% heading ratio for its July and August net production.
Speaker Change: at a $70 brain strike price for taking against the drop in on process.
Speaker Change: from Gerazos to cover 40% of the company's expected petrol exposure onto the third quarter of 2025 and 20% of its exposure through the fourth quarter with floors at over 4200 petrol level.
Speaker Change: Both the judges for the company with Guest of Visibility and help mitigate the impact of price fluctuations will also allow them to visit to the liver on its 20.5 targets.
Speaker Change: We respect to our 2025 financial targets that we would like to remind our investors that within our MDNA materials, we provided equal breakdown of our earnings, including sensitivity to the impact of our operating EBITDA at different oil-priced scenarios.
Speaker Change: Starting over to our Infrastructure Survey review, we will also like to highlight some of the details of the ODL interest recapitulation transaction.
Speaker Change: Adelanda Luda, the company and sign a commitment that will not part group, especially race 220 million in non-recore, secure financing supported by the cash flows from Frontera Direct Interest in ODO.
Speaker Change: As a result of recovery capitalization, Frontera will receive approximately 150 million dollars in proceeds and will exclude what's the why-ya from the security package.
Speaker Change: Assertirma highlighted, as we complete this first important step, the audio recapitalization, the total surface that I have to remain to surface the value of the surface of its infrastructure assets.
Speaker Change: From dinner, we meet the open to observing all options, including a potential future separation of the infrastructure business and other today's transactions, which could include a potential of L&G Intercursory in Porto Vaya.
Speaker Change: We would like to thank Golden Sects of our fights as they were to use these various alternatives.
Speaker Change: Finally, I'd like to take, I'd like to provide an update on our Investor Valley Initiative today.
Speaker Change: Here today, in 25, the company refreshes 1 million of its 2028 unsecured notes.
Speaker Change: As mentioned in our press release, Frontera Soso beat up approximately $7 million in dividends here today.
Speaker Change: Together with this results announcement, the board has declared a quarterly dividend of 6.25 cents per share of Canadian payable to share this record as of July 3, 2025 to be paid on or around July 17, 2025.
Speaker Change: regarding the company's substantial issuer vids or SIDs from therapy in January 42 million
Speaker Change: The SID was widely participated and successful with an over 90% participation rate.
Speaker Change: We also are asked today and subject to the closing of the financing related to the audiolary capitalization, the intention to comment a new substantial issue a bit.
Speaker Change: So which the company will offer to purchase it up to 65 million of its common shares per cancellation at a fixed price for share. The terms of the new FIB include pricing will be determined in the course and the company that is now exiting that it will be completed in July 2025.
Speaker Change: The SID will not be conditional upon any minimum number of shares being tendered and will be subjected to conditions customary for transactions of this nature.
Speaker Change: From there I can be used to believe this format is the most efficient means to distribute capital to all of our shareholders and look forward to the launching of this process in the next weeks.
Speaker Change: Obviously, we announced the launch of a CAP-CAP tender and concisualization for our 2020-18 year notes.
Speaker Change: The data is offered to purchase up to 65 million of its notes. Along with the tender, the company launched a solicitation of consent to affect certain propulsive amendments to the inventor
Speaker Change: The purpose of the tender offer and goes to solicitation is to gain greater financial and operational flexibility while simultaneously reducing the company's overall debt of standing.
Speaker Change: Additionally, the company believes that for both the amendments shall permit the company to take certain actions previously limited by certain restrictions in the note-inventure, including an unlimited too, allowing for additional statements, including those related to unrestricted theories.
Speaker Change: providing additional flexibility in managing working capital to support operational efficiency and financial resilience, increase the amount of burdeniness and links, and reduce conditions and requirements living in the company's ability to pursue strategic transactions that may enhance the issuers, growth, and value.
Speaker Change: In each case, without violating the provisions of an open-ended trip [inaudible]
Speaker Change: The tender offer and the solicitation will be subject to various conditions including without limitation but the completion of how obtained that financing on the terms and conditions and yielding net cash proceeds reasonably satisfactory to the company.
Speaker Change: Request for the Cumentation District Section should be directed to the information and tender agent at the offer website, projects.savali.com, backslash, Frontera.
Speaker Change: Questions regarding the offer? Or the solicitation should be directed to the mill managers and solicitation
More information can be found in this morning's specialist.
Alonzo: I'm like now, I would like to now turn the ground back to Orlando.
Speaker Change: Thank you, Rene. Before I appeal today's call, I would like to highlight that on March 11th of this year, Frontera was once again recognized by Eddie Fier as one of the foremost ethical companies.
Speaker Change: This is the fifth consecutive year that the company has received this distinction from Edison, a global leader in defining and advancing the standards of ethical business practices.
Speaker Change: Additionally, we also released our 2024 sustainability report which highlights the progress we have made over the last years against our sustainability goals.
Speaker Change: as we work towards a control of corporate consciousness that allow us to state that we are committed to developing a sustainability strategy throughout our business to drive operational efficiency.
Speaker Change: Notably, we successfully achieved 100% of our 2024 sustainability goals, which is a testament to ongoing commitment by all Frontera employees to responsibly manage our business.
Thank you.
Speaker Change: With that, I would like to conclude by saying thank you to Oriana René for the comments and thank you everyone for attending our call.
Speaker Change: I will not turn the call back to our operator who will open up for questions.
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please for this style? Follow by the number one on your touch on phone. You will hear a prompt that your hand has been raised.
Speaker Change: Should you wish to decline from the polling process, please press the starfall by the number two. If you are using a speakerphone, please lift the handset before pressing any case.
We'll pause for a moment to compile the Q&A roster.
Speaker Change: Your first question comes from Peter Bowley from Yefries. Please go ahead.
Peter Bowley: Hi, thank you for the call and the opportunity for a question. Can you please clarify how much of ODL's annual dividend flow will be used or expected to be used to service this new debt being taken in the recapitalization given the new loans expected interest rate and amort profile. Thank you.
Speaker Change: Hi, Peter. How are you? Thank you for joining the call. You know, effectively we are securing the flow from ODL to the scene I'm seeing. So all of the cash flows associated with your dividend would be used to to service that new recapitalization of the scene I'm seeing.
Okay, thank you.
Yep.
Speaker Change: Thank you. Your next question comes from Thomas Clamca from Gramersi. Please go ahead.
Thomas Klamka: Good morning, gentlemen. Can you talk a little bit about the infrastructure recap plan? The original plan, I believe, was to sell the infrastructure assets, and now you're doing this asset financing instead. Can you talk about the thought process that you took? [inaudible]
Thank you. Thank you.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
John , how are you? Good, thank you.
Thomas Klamka: Look, I think that we, you know, to the board, we conducted a very thorough and extensive process. As Gabriel said, with the support of the government team.
after a review of the different alternatives.
Um...
Thomas Klamka: We believe that the best course on action is to pursue this audio recapitalization, which allows us to receive the most amount of cash proceeds associated with
Thomas Klamka: The participants are sections that were available while also retaining the equity of this business. I would like to point out that the audio pipeline is one of the hidden gems within the Eckerts Petron pipeline portfolio. It sits in the Janos basin which covers roughly 70% of all the current one peer research in country.
Thomas Klamka: and it's particularly one of the main arteries together with a sense of feeding the crude oil in the country. So we believe there's the remains of central upside there and we believe that with this transaction we unlock that partial of the value associated with the pipeline while retaining some of that upside.
Similarly, now our focus turns into. Thank you.
Speaker Change: I'm a Puerto Bahia and I think that's both Gabriel and Orlando highlighted, you know, our next step is to continue with the efforts of Max and my team value.
and we believe there are several strategic projects. [inaudible]
Speaker Change: that are in the maturing stage and ones that are in the close to completion stage that will continue to unlock value and generate a lot of cash for the company and its investors. So our focus now turns to continue to maximize in that value, I know, or go get it, or along the future, if you want to kind of add some. No, I mean, the only thing I would add, just to only building on what Rene said is that
Speaker Change: is that we remain absolutely open to consider all the opportunities, all opportunities to enhance to hold our bodies.
Speaker Change: So, including a potential separation of the infrastructure business and other strategy transactions involving the infrastructure business, which could include the... [inaudible]
Thank you.
Speaker Change: Okay, and the consensualization you're doing for the 28th, is that needed in order to do these ODL financing? Or is that just to get additional flexibility away from this financing?
Speaker Change: We are listening to what investors wanted. Investors have asked us to repurchase debt.
Speaker Change: You know, with these flows, the company has the capacity to utilize these flows to be independent, but he has chosen to use this to distribute, you know, relatively equally to investors. [inaudible]
Piotra, NSID, but also to a repurchase of debt.
Speaker Change: and in addition to that, we're seeking additional flexibility because we do believe that there's a unique opportunity for us to capture within the Columbia market and we need to be thinking strategically all times. So again, to ask your question, no, completely unrelated, but if things are focused on maximizing value for all of our stakeholders. Thank you very much.
Okay, thank you very much.
Speaker Change: Hey guys, thanks for taking my question. So just following up on the last question, I think it's great that you guys are doing the SIB and the tender for the bonds. It makes a lot of sense to me. The thing that I don't understand and that I'm not sure you guys have effectively communicated is the logic around the unusual nature of the special issue or bids that you've done. I understand you might not be able to talk about the one [inaudible]
Speaker Change: about to do but you can certainly answer questions on the ones that you did last year. The percent premium that was offered was extremely high relative to any other example we could find among Canadian issuers. [inaudible]
Speaker Change: and it would seem if you were trying to maximize the value for all stakeholders and shareholders that you would offer a lower premium and try to retire more shares via S.I.B. rather than offering such an extreme premium on repeated S.I.B.s and retire fewer shares. Could you explain the logic behind that? Try and understand a little better what the logic is of intentionally retiring.
Fever Shares, and losing some of that potential accretion.
Speaker Change: Okay, I think it's a good question. And the answer speaks for itself. The reality is that...
Speaker Change: 90% plus of our shoulders participated. So, when you think about it, even mathematically, everybody's getting their results. Our intention is to distribute the most amount of capital in the most efficient way.
Speaker Change: Less Friction Form, and we've identified the SID to be the most friendly and attractive one to do it.
Speaker Change: and, you know, to entice people to serve participating in SIDs, we found, and to a lot of them, to participate in a service of the size, is to offer a high premium, and we are indifferent
Speaker Change: Elora Raid because, ideally, what you want is every shareholder to participate. And I would call it 90 plus percent approval, but basically most shareholder's all shareholder's participating, significantly all of our shareholder's participating.
Speaker Change: OK, thanks. And then just as a follow up on the bonds, again, I think it's a great idea for you guys to do a mix of buying back bonds at a huge discount. Would there a limit to how many bonds you were allowed to buy in the open market given the very large discount they were trading at until this announcement? Or what's the logic on doing a tender for more rather than continuing to buy maybe a little more aggressively the bonds in the market?
Thank you.
Speaker Change: Sorry Josh, I didn't quite understand that question, but let me see if I can try and answer
because of the formal public nature of this, that... [inaudible]
Speaker Change: You know, there are certain limits of how you can act aesthetically by but as to this one particular section we're within those limits and we believe this is an appropriate way for us to get everybody to participate and for us to be able to give the opportunity to everyone or to participate rather than doing a piece meal.
Speaker Change: Well, we try to also do a piecemeal which I know it's been a frustration for authority investors is we've struggled with the liquidity and the inability to purchase more because of that lack of liquidity.
Speaker Change: So all this you say we will witness is the appropriate venue.
Thomas Klamka: to perform for us to offer internal for investors. And second, when we thought about the amount in the rationale, again, we, like I said to Tom, we heard investors loud and clear.
Great, thank you. I appreciate it.
Thank you. Your next question goes from Diego.
Thomas Klamka: Sorry, he withdrew his question. Your next question comes from Fred Strider from Caillou's Capital. Please go ahead.
Aloha, can you hear me?
Der.
Speaker Change: I just had a question around, I guess, a range of valuations that you were seeing from the Goldman process for the ODL pipeline. I guess you probably can't give hard numbers, but I would be curious to see how far off the bits were versus this refinancing option.
Let.
Yeah, thanks. That's it from me.
All right, we're good.
Speaker Change: Jason Omen, if you would like to ask a question please first start then number one your telephone
Speaker Change: There are no further questions at this time. Should you have any further questions? Please email I are at Frontera Energy.