Q2 2025 Frontera Energy Corp Earnings Call

Speaker #1: Good morning, my name is Sergio and I'll be your conference facilitator today. Welcome to Frontera Energy's second quarter 2025 operating and financial results conference call.

Sergio: Good morning. My name is Sergio, and I'll be your conference facilitator today. Welcome to Frontera Energy's second quarter 2025 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 through an audio webcast on the company's website. 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 ir@fronteraenergy.ca. This call contains forward-looking information within the meaning of applicable Canadian security laws relating to activities, events, or developments the company believes or expects will or may occur in the future. Forward-looking information reflects the current expectations, assumptions, and beliefs of the company based on information currently available to it.

Speaker #1: 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.

Speaker #1: Following the speaker's remarks, there will be a time for questions. Panelists and investors are reminded that any additional questions can be directed to Frontera following today's call at IR@fronteraenergy.ca.

Speaker #1: This call contains forward-looking information within the meaning of applicable Canadian securities laws, relating to activities, events, or developments that the company believes or expects will or may occur in the future.

Speaker #1: 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.

Sergio: Although the company believes the assumptions are reasonable, forward-looking information is not a guarantee of future performance. Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the company to differ materially from those discussed in the forward-looking information. The company's MD&A for the quarter ending June 2025, the company's annual information from dated March 10, 2025, and the documents it files from time to time with securities regulatory authorities describe the risks, uncertainties, material assumptions, and other factors that will 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. Gabriel de Alba, Chairman of the Board of Frontera Energies. Mr.

Speaker #1: Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the company to differ materially from those discussed in the forward-looking information.

Speaker #1: The company's MD&A for the quarter ending June 2025, the company's annual information from dated March 10, 2025, and the documents it files from time to time with securities regulatory authorities describe the risks, uncertainties, material assumptions, and other factors that could influence actual results.

Speaker #1: Any forward-looking information is 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 #1: I would now like to turn the call over to Mr. Gabriel de Alba. Chairman of the Board of Frontera Energies, Mr. de Alba, please go ahead.

Sergio: de Alba, please go ahead.

Speaker #2: Thank you, operator. Good morning, everyone, and welcome to Frontera's second quarter 2025 operating and financial results conference call. Joining me on today's call are Orlando Cabrales, Frontera's CEO, and René Burgos-Díaz, Frontera's CFO.

Gabriel de Alba: Thank you, Operator. Good morning, everyone, and welcome to Frontera's second quarter 2025 operating and financial results conference call. Joining me on today's call are Orlando Cabrales, Frontera's CEO, and Rene Burgos-Diez, Frontera's CFO. Also available to answer questions at the end of the call, we have Victor Vega, VP Field Development, Reservoir Management and Exploration; Alejandra Bonilla, General Counsel; Ivana Revalo, VP Operations; and Renata Campañaro, VP Marketing, Logistics, and Business Sustainability. Thank you for joining us. Throughout the second quarter, despite ongoing volatility in the global economy and all markets, Frontera remained focused on executing its strategic priorities. The company achieved strong operational results and completed important initiatives aimed at creating value for its shareholders and bondholders. The company delivered $76.1 million in operating EBITDA, generated $27.1 million in adjusted infrastructure EBITDA, and ended the quarter with a strong cash balance of $197.5 million.

Speaker #2: Also available to answer questions at the end of the call, we have Victor Vega, VP Field Development, Reservoir Management, and Exploration; Alejandra Bonilla, General Counsel; Iván Arévalo, VP Operations; and Renata Campañaro, VP Marketing, Logistics, and Business Sustainability.

Speaker #2: Thank you for joining us. Throughout the second quarter, despite ongoing volatility in the global economy and oil markets, Frontera remained focused on executing its strategic priorities.

Speaker #2: The company achieved strong operational results and completed important initiatives aimed at creating value for its shareholders and bondholders. The company delivered $76.1 million in operating EBITDA, generated $27.1 million in adjusted infrastructure EBITDA, and ended the quarter with a strong cash balance of $197.5 million.

Speaker #2: Additionally, the company prioritized returning capital to all investors via successful $80 million tender offer and consent solicitation of its senior notes due in 2028.

Gabriel de Alba: Additionally, the company prioritized returning capital to all investors via a successful $80 million tender offer and consent solicitation of its senior notes due in 2028. Through the consent solicitation, the company strengthened its financial flexibility and reduced outstanding debt obligations, reducing its off-screen net debt by 20%. The amendments to the indenture allowed Frontera's indenture with industry standards and offered targeted operational flexibility, supporting the delivery of sustainable business and reserve growth, including growth from inorganic transactions. Subsequent to the quarter, Frontera completed a Canadian $91 million substantial issuer bid, the largest in the company's history. The SIB had a 92.6% participation, demonstrating that the capital distribution strategy has proven to be effective and well received by the shareholders. The company also declared a quarterly dividend of $0.0625 per share, or approximately $3.5 million in aggregate, and initiated daily stock buybacks via a non-course issuer bid program.

Speaker #2: Through the consent solicitation, the company strengthened its financial flexibility and reduced outstanding debt obligations by reducing its upstream net debt by 20%. The amendments to the indenture allowed Frontera's indenture with industry standards and offered targeted operational flexibility.

Speaker #2: Supporting the delivery of sustainable business and reserve growth, including growth from inorganic transactions. Subsequent to the quarter, Frontera completed a Canadian $91 million substantial issuer bid.

Speaker #2: The largest in the company's history. The SIB had a 92.6% participation, demonstrating that the capital distribution strategy has proven to be effective and well received by the shareholders.

Speaker #2: The company also declared a quarterly dividend of $0.0625 per share, or approximately $3.5 million in aggregate, and initiated daily stock buybacks via a non-coursed issuer bid program.

Speaker #2: Over the last 12 months, Frontera returned over $144 million to shareholders through dividends and share buybacks. The company also reduced its senior unsecured notes principal by more than 20%.

Gabriel de Alba: Over the last 12 months, Frontera returned over $144 million to shareholders through dividends and share buybacks, and also reduced its senior and secured notes' principal by more than 20%, highlighting its commitment to returning capital to all investors. In Guyana, the 90-day consultation and negotiation period, which was established following the notice of intent sent to the Government of Guyana, ascended. On July 23, the company received a letter reaffirming the Government's vision that the current time license expired, but noted that it may consider a final meeting with the investors on a without-prejudice basis in October 2025, and the joint venture will be informed as to whether such a meeting will occur in September 2025.

Speaker #2: Highlighting its commitment to returning capital to all investors, in Guyana, the 90-day consultation and negotiation period, which was established following the notice of intent sent to the Government of Guyana, has ascended.

Speaker #2: On July 23, the company received a letter reaffirming the Government's vision that the current license has expired, but noted that it may consider a final meeting with the investors.

Speaker #2: On a without-prejudice basis, in October 2025, the joint venture will be informed as to whether such a meeting will occur in September 2025.

Speaker #2: Following the expiry of the 90-day consultation and negotiation period, arising from the notice of intent, and in view of the uncertainty introduced by the Government of Guyana, we have recognized an impairment of over $430 million related to our investment in the current time block, in accordance with prudent accounting standards.

Gabriel de Alba: Following the expiry of the 90-day consultation and negotiation period arising from the notice of intent, and in view of the uncertainty introduced by the Government of Guyana, we have recognized an impairment of over $430 million related to our investment in the current time block in accordance with prudent accounting standards. The joint venture remains firmly of the view that its interest in and the license for the current time block remain in place and in good standing, and that the petroleum agreement has not been terminated. We remain committed to working with the Government of Guyana to resolve these issues amicably while preparing to assert and protect our legal and contractual rights through all available legal remedies as necessary. Looking ahead, Frontera will continue to consider all options to realize the full value of its assets and enhance shareholder value.

Speaker #2: The joint venture remains firmly of the view that its interest in and the license for the current time block remain in place and in good standing.

Speaker #2: And that the petroleum agreement has not been terminated. We remain committed to working with the Government of Guyana to resolve these issues amicably, while preparing to assert and protect our legal and contractual rights to all available legal remedies, as necessary.

Speaker #2: Looking ahead, Frontera will continue to consider all options to realize the full value of its assets and enhance shareholder value. In doing so, it will continue to consider initiatives in 2025 and beyond, including additional dividends, distributions, share or bond buybacks, based on the overall results of the business, oil prices, and the company's cash flow generation.

Gabriel de Alba: In doing so, it will continue to consider initiatives in 2025 and beyond, including additional dividends, distributions, share, or bond buybacks based on the overall results of the business, all prices, and the company's cash flow generation. 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. I'd like now to turn the call over to Orlando Cabrales, Frontera's CEO, and Rene Burgos, Frontera's CFO, who will share their views on our first quarter results. Orlando?

Speaker #2: 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 #2: I'd like to now turn the call over to Orlando Cabrales, Frontera's CEO, and René Burgos, Frontera's CFO, who will share their views on our first quarter results.

Speaker #2: Orlando?

Speaker #3: Thank you, Gabriel. Good morning, everyone, and thank you for joining us for today's call. Frontera's solid second-quarter financial and operating results, achieved despite the ongoing market volatility, reflect the effective actions taken to deliver stakeholder value, maintain financial and operational flexibility, and reduce long-term leverage.

Orlando Cabrales: Thank you, Gabriel. Good morning, everyone, and thank you for joining us for today's call. Frontera's solid second quarter financial and operating results achieved despite the ongoing market volatility reflect the effective actions taken to deliver stakeholder value, maintain financial and operational flexibility, and reduce long-term leverage. We have increased our total production quarter over quarter to 41,055 barrels per day, driven by increased processing capacity at Saaren, investments in new flow lines in our heavy oil fields, and a successful well intervention program within our light and medium blocks, and new commercialized volumes of natural gas production from the Bin One block.

Speaker #3: We have increased our total production quarter over quarter to 41,055 barrels per day, driven by increased processing capacity at Saharan, investments in new flow lines in our heavy oil fields, and a successful well intervention program within our light and medium blocks.

Speaker #3: A new commercialized volume of natural gas production from the Binwam block. During the quarter, we maintained our focus on operational improvements, reducing capital expenditure and costs, and process efficiencies across our business.

Orlando Cabrales: During the quarter, we maintained our focus on operational improvements, reducing capital spending and cost and process efficiencies across our business, lowering our production costs by 10.3% to $9.1 per barrel quarter over quarter, driven by freeware well interventions and the implementation of new production technologies in the fields. We also reduced our transportation costs by 5.7% to $11.62 per barrel quarter over quarter, driven by higher domestic wellhead sales. During the second quarter, the company drilled 26 development wells, mainly at our Quipa and CP6 blocks in Colombia, and completed 22 well workovers in other areas. On the exploration front, our efforts now turned to the Guaco One Well, where preparation and permits were secured, and drilling is expected in the second half of the year. Our standalone and growing Colombian infrastructure business, which includes the company's interest in OVL, generated an adjusted infrastructure EBITDA of $27.1 million.

Speaker #3: Lowering our production costs by 10.3% to $9.1 per barrel, quarter over quarter, driven by fewer well interventions and the implementation of new production technologies in the fields.

Speaker #3: We also reduced our transportation costs by 5.7%, to $11.62 per barrel, quarter over quarter, driven by higher domestic wellhead sales. During the second quarter, the company drilled 26 development wells, mainly at our Kipa and CT6 blocks in Colombia, and completed 22 well walkovers in other areas.

Speaker #3: On the exploration front, our efforts now turn to the Guapowam well, where preparation and permits were secured, and drilling is expected in the second half of the year.

Speaker #3: Our standalone and growing Colombian infrastructure business, which includes the company's interest in OVL, generated an adjusted infrastructure EBITDA of $27.1 million. At Puerto Bahia, the Reficar connection was completed by the end of the quarter, and we are aiming for the first volumes to be transported during Q3 2025.

Orlando Cabrales: At Puerto Bahia, the Reficar connection was completed by the end of the quarter, and we are aiming for the first volumes to be transported during the third quarter of 2025. The connection is a strategic asset for the Cartagena Bay, offering higher throughput of hydrocarbons and the lowest transportation costs and superior logistics for the refinery of Cartagena. Other strategic investments in the port, including the LPG JV with Empresas Gascons, are progressing on a schedule. The port is also pursuing additional investment opportunities that leverage its facilities and infrastructure for sustainable long-term growth. Following the end of the quarter, the company announced it had reached an agreement to divest its interest in the non-core Perico and Espejo fields in Ecuador. The transaction is consistent with our strategy of maximizing value over volumes and supports a stronger focus on our higher-impact Colombia upstream operations.

Speaker #3: The connection is a strategic asset for Cartagena Bay, offering higher throughput of hydrocarbons, the lowest transportation costs, and superior logistics for the refinery of Cartagena.

Speaker #3: Other strategic investments in the port, including the LPG joint venture with Empresas Gascom, are progressing on schedule. The port is also pursuing additional investment opportunities that leverage its facilities and infrastructure for sustainable long-term growth.

Speaker #3: Following the end of the quarter, the company announced it had reached an agreement to divest its interest in the non-core Perico and Espejo fields in Ecuador.

Speaker #3: The transaction is consistent with our strategy of maximizing value over volume and supports a stronger focus on our higher impact Colombia upstream operations. The divestment will provide the company a total cash consideration of $7.8 million to Frontera, plus additional contingent consideration of $750,000 upon Perico achieving cumulative production of 2 million barrels as of January 1, 2025.

Orlando Cabrales: The divestment will provide the company a total cash consideration to Frontera of $7.8 million, plus additional contingent consideration of $750,000 upon Perico achieving a cumulative production of 2 million barrels as from January 1st, 2025. The closing of the transaction, pending regulatory approvals, is expected to occur in the second quarter of 2026. As a result, we are adjusting our 2025 production guidance to account for the impact of the Ecuador sale to 39,500 to 41,000 BOE per day. In light of the current oil price environment, we are also adjusting our capital expenditure guidance downwards by approximately $20 million, reducing development facilities CAPEX to $45 to $65 million, and exploration CAPEX to $25 to $35 million, reflecting our disciplined approach to capital spending and ability to identify ongoing operational efficiencies.

Speaker #3: The closing of the transaction, pending regulatory approvals, is expected to occur in the second quarter of 2026. As a result, we are adjusting our 2025 production guidance to account for the impact of the Ecuador sale, to 39,500 to 41,000 BOE per day.

Speaker #3: In light of the current oil price environment, we are also adjusting our capital expenditure guidance downwards by approximately $20 million, reducing development facilities CAPEX to $45 to $65 million, and exploration CAPEX to $25 to $35 million.

Speaker #3: Reflecting our discipline approach to capital expending, and ability to identify ongoing operational efficiencies. Additionally, we are providing operating EBITDA guidance at 70 Brent price, with a target of between 320 million dollars to 360 million dollars, and revising our adjusted infrastructure EBITDA guidance to between 110 to 125 million dollars.

Orlando Cabrales: Additionally, we are providing operating EBITDA guidance at a 70 brand price with a target of between $320 million to $360 million, and revising our adjusted infrastructure EBITDA guidance to between $110 to $125 million. I would now like to turn the call over to Rene Burgos, Frontera's CFO.

Speaker #3: I would now like to turn the call over to René Burgos, Frontera's CFO.

Speaker #4: Thank you, Orlando. And thank you, Gabriel. Good morning, everybody, and thank you as always for your support and interest in our company. I'll try to go through these very quickly, as I'd like just to take a moment to highlight a few key financial aspects of our quarterly results.

Rene Burgos-Diez: Thank you, Orlando, and thank you, Gabriel. Good morning, everybody, and thank you as always for your support and interest for our company. I'll try to go through these very quickly as I'd like to take a moment to highlight a few key financial aspects of our quarterly results. For the second quarter, the company reported a net loss of $455.2 million or $5.89 per share. Our net loss in the quarter resulted primarily from non-cash impairment charges, totaling $477 million related to the company's interest in the content license and our Ecuadorian asset divestment. Including these impairment charges, the company's net income for the quarter would have been approximately $48 million. Our operating reduction for the quarter was approximately $76.1 million compared to $83.5 million in the first quarter, or a 9% reduction.

Speaker #4: For the second quarter, the company recorded a net loss of $465.2 million, or $5.89 per share. Our net loss for the quarter resulted primarily from non-cash impairment charges, totaling $477 million, related to the company's interest in the content license and our Ecuador asset divestment.

Speaker #4: Excluding these improvement charges, the company's net income for the quarter would have been approximately $48 million. Our operating EBITDA for the quarter was approximately $76.1 million, compared to $83.5 million in the third quarter, representing a 9% reduction.

Speaker #4: This was primarily due to lower current prices, which were 11% lower on a quarter-over-quarter basis, partially offset by the lower production and transportation costs.

Rene Burgos-Diez: This was primarily due to lower price tags, which were 11% lower on a quarter-over-quarter basis, partially offset by the lower production and transportation costs, which highlights our operational discipline. Moving on to our key operational performance indicators, in the quarter, we saw average freight sales prices at $66.71. We continue to see strong demand for the company's heavy crude barrel, which in turn has resulted in a lower average documented financial on export sales of $1.69. This compares to the prior quarter of $4.38 and over $3 per barrel improvement. Our purchased crude net margin associated with our dilution and transportation programs was $3.53, lower than the $3.81 for the prior quarter. These are the results of improvements in our diluent purchasing strategy. Reviewing our operating costs, our production, energy, and transportation output per barrel for the quarter totaled $25.34.

Speaker #4: Which highlights our operational discipline. Moving on to our key operational performance indicators, in the quarter we saw average Brent sales prices at $66.71, and we continued to see strong demand for the company's heavy crude barrels, which in turn has resulted in a lower average last-minute differential on export sales of $1.69.

Speaker #4: This compares to the prior quarter of $4.38 and represents over a $2 per barrel improvement. Our purchase crude net margin, associated with our dilution and transportation improvements, was $3.53, lower than the $3.81 for the prior quarter.

Speaker #4: These are the results of improvements in our purchasing strategy. Reviewing our operating costs, our production energy and transportation output per barrel for the quarter totaled $25.34.

Speaker #4: This compares to $27.74 for the prior quarter, representing a reduction of over $2, primarily resulting from improvements across all of our cost categories. The decrease in quarter-over-quarter production costs was primarily a result of lower volume initial activities, as Orlando highlighted, and the adoption of new field technologies focused on reducing water production at the wellhead.

Rene Burgos-Diez: This compares to $27.74 for the prior quarter, and over $2 reductions resulted primarily from improvements across all of our cost categories. The decrease in quarter-over-quarter production costs was primarily a result of lower volume ratio activities, as Orlando highlighted, and the adoption of new field technologies focused on reducing water production at the wellhead. Energy costs also decreased in the quarter, mainly related to lower market prices and also lower consumption per barrel. Transportation costs also decreased as a result of reduced transported volume resulting from higher domestic wellhead sales prices. In our infrastructure business, adjusted EBITDA for the quarter was $27.1 million, which compares to $28.6 million in the first quarter in the prior quarter. The quarter-over-quarter decrease was primarily due to higher operations in Saara.

Speaker #4: Energy costs also decreased during the quarter, mainly related to lower market prices and also lower consumption per barrel. Transportation costs also decreased as a result of reduced transported volumes, resulting from higher domestic wellhead sales prices.

Speaker #4: In our infrastructure business, adjusted EBITDA for the quarter was $0.20 million, which compares to $28.6 million in the fourth quarter of the prior year.

Speaker #4: The quarter over quarter decrease was primarily due to higher operating costs in Sahara. This happens as we continue to ramp up its operations, with water processing wells in Sahara up to over 50% on a quarter over quarter basis, which was offset by positive results in the OVL segment.

Rene Burgos-Diez: This happens as we continue to ramp up this operation with water purchasing volumes in Saara up to over 50% on a quarter-over-quarter basis, which was offset by positive results in the OVL segment. As of June 30th, 2025, the company reported a total cash position of $197.5 million, including $184.9 million of unrestricted cash and cash equivalents. Since the quarter, the company did complete its NID and the payment of approximately $66.6 million to shareholders, which we will see reflected in the next quarter. We will touch on this further shortly. Turning now to risk management, our current risk management strategy supports our operations and planning. From there, I use derivative instruments to manage exposure to all kinds of benefits for our authorities.

Speaker #4: As of June 30, 2025, the company recorded a total cash position of $197.5 million, including $184.9 million of unrestricted cash and cash equivalents. Since the quarter, the company has completed its SIB and the payment of approximately $60 million to shareholders, which we will see reflected in the next quarter.

Speaker #4: We will touch on this further shortly. Turning now to risk management, our current risk management strategy supports our operations and planning. Frontera uses derivative instruments to manage exposure to oil prices and mitigate volatility.

Speaker #4: On the oil side, the company has entered into hedges, successfully securing up to a 40% hedging ratio until December 2025, at prices between $65 and $70 Brent.

Rene Burgos-Diez: On the oil side, the company has entered into hedges, with currently securing up to 40% hedging ratio until December 2025 at prices between $65 and $70 rent, protecting against a trough in oil prices. Year to date, we have realized approximately $6 million in gain from our hedging activities, excluding previous costs, enhancing financial stability and a maximum market incorporation. Frontera has also covered 40% of the company's expected export exposure until the first quarter and 20% of its exposure to the fourth quarter, with floors at over the 4,200 cash flow level. This is providing the company with cash flow stability and helps mitigate impacts on future fluctuations while allowing the business to deliver on its 2025 targets. Finally, I'd like to provide an update on our investor value initiatives.

Speaker #4: Protecting against a drop in oil prices, year-to-date, we have realized approximately $6 million in gains from our hedging activities, excluding premium costs.

Speaker #4: Enhancing financial stability and month-to-month marketing fluctuations. Frontera has also covered 40% of the company's expected exposure for the third quarter and 20% of its exposure for the fourth quarter, with Flores at over the 4,200 peso level.

Speaker #4: This is just providing the company with cash flow visibility and helps mitigate impacts on future fluctuations while allowing the business to deliver on its 2025 targets.

Speaker #4: Finally, I'd like to provide an update on our investor value initiative. In the second quarter, the company repurchased $80 million of its 2028 notes through our cash tender and consent solicitation.

Rene Burgos-Diez: In the second quarter, the company repurchased $80 million of its 2028 notes through our cash tender and consent solicitation. Frontera has paid approximately $10.5 million in dividends year to date, and the dividend in the second quarter result, the board has declared a quality dividend of 6.25 cents per share of Canadian to shareholders on record as of October 2nd, 2025, and to be paid on or around October 16th. Regarding the company's potential issuer bids, SIB, Frontera repurchased $91 million Canadian or $66 million US dollars of its common shares through SIB that ended in July, which is in addition to the company's $42 million or $30 million Canadian or $30 million USD of common shares repurchased through the SIB that closed in January of this year.

Speaker #4: Frontera has paid approximately $10.5 million in dividends year to date, and together with the second quarter results, the board has declared a quarterly dividend of 6.25 cents per share Canadian.

Speaker #4: To shareholders of record as of October 2, 2025, and to be paid on or around October 16. Regarding the company's substantial issuer bid (SIB), it repurchased 91 million Canadian dollars, or $66 million US dollars, of its common shares through SIB that ended in July.

Speaker #4: which is in addition to the company's 42 million or 30 million Canadian or $30 million of common shares repurchased through the SIB that closed in January of this year.

Speaker #4: The company is also currently repurchasing shares daily through an automatic share purchase program, the NCIB, that we recently launched in July. With that, I would like now to turn the call back to Orlando for a set of thoughts.

Rene Burgos-Diez: The company is also currently repurchasing shares daily through an automated issuer purchase program, the NTIB, that we recently launched in July. With that, I would like now to turn the call back to Orlando for a final thought.

Speaker #2: Thank you, René. Before I conclude today's call, I would like to highlight that the company continues to advance toward its 2028 sustainability goals. As well as on the 2025 plan, the progress made on almost every goal during the second quarter.

Orlando Cabrales: Thank you, Rene. Before I conclude today's call, I would like to highlight that the company continues to advance toward its 2028 sustainability goals, as well as on the 2025 plan, with progress made on almost every goal during the second quarter. On the sustainability front, in Frontera, we are committed to following and promoting human rights within our operations, and we have launched the business network for responsible business conduct to promote and share best practices in human rights, diligence, and training. In the second quarter of 2025, local suppliers accounted for over 11% of total purchases, reflecting the ongoing commitment to support local economic development. Additionally, we maintain a strong performance in health and safety indicators, achieving a total recordable incident rate of 0.71 and also attaining a water reuse rate of 37.6% within our operational activities.

Speaker #2: On the sustainability front, in Frontera we are committed to following and promoting human rights within our operations. We have launched the business network for responsible business conduct to promote and share best practices in human rights diligence and training.

Speaker #2: In the second quarter of 2025, local suppliers accounted for over 11% of total purchases, reflecting the ongoing commitment to support local economic development. Additionally, we maintain a strong performance in health and safety indicators, achieving a total recordable incident rate of 0.71, and also attaining a water reuse rate of 37.6% within our operational activities.

Speaker #2: With that, I would like to conclude by saying thank you to Gabriel and René for their comments, and thank you to everyone for attending our call.

Orlando Cabrales: With that, I would like to conclude by saying thank you to Gabriel and Rene for their comments, and thank you for everyone for attending our call. I will now turn the call back to our operator, who will open up for questions.

Speaker #2: I will now turn the call back to our operator, who will open up for questions.

Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please first start by stating your name, followed by the one on your touchstone phone.

Sergio: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Sarah Constantine from SMC. Please go ahead.

Speaker #1: You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please first start, followed by the two.

Speaker #1: If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. If your first question comes from Sarah Constantine from SMC, please go ahead.

Speaker #5: Hi, good morning. I had two questions. The first question is on Ecuador. I want to find out; regarding the purchase price, it seemed a little bit low.

Sarah Constantine: Hi, good morning. I had two questions. The first question is on Ecuador. I wanted to find out regarding the purchase price. It seemed a little bit low. It worked out to be $8,000 per flowing barrel. Could you maybe discuss, you know, how you achieved that price? And then I guess the second question on the NCIB appears we've purchased back around 80,000 shares. I was curious why the NCIB has not been hit more aggressively, given the stock is around $6. I was expecting to see double that. You know, we did a buyback at $12 a share, and I was hoping, you know, we'd be buying back the maximum we could to increase the value for all shareholders. Thank you.

Speaker #5: It worked out to be $8,000 per flowing barrel. Could you maybe discuss, you know, how you achieved that price? And then, I guess the second question on the NCIB: it appears we've purchased back around 80,000 shares.

Speaker #5: I was curious why the NCIB has not been hit more aggressively, given the stock is around $6. I was expecting to see double that. You know we did a buyback at $12 a share, and I was hoping we'd be buying back the maximum we could to increase the value for all shareholders.

Speaker #5: Thank you.

Speaker #4: Hi, ladies, and good morning, sir. I apologize; we disconnected briefly. Could you repeat your first question? I can tackle the second question quickly.

Rene Burgos-Diez: Hi, good morning, Sarah. I apologize. We disconnected briefly. Could you repeat your first question? And I can tackle the second question quickly. Could you please repeat your first question?

Speaker #4: Could you please repeat your first question?

Speaker #5: Yeah, this first question was, in terms of the Ecuador sale, I was a little bit surprised by the price, because it worked out to be $8,000.

Sarah Constantine: Yeah. This first question was, in terms of the Ecuador sale, I was a little bit surprised by the price because it worked out to be $8,000 per flowing barrel. I was curious why it was sold for $8 million. Is there some additional reasoning for that, or is that the going rate for Ecuadorian assets? Because that seems kind of low if you compare it to US market comps.

Speaker #5: Per flowing barrel, I was curious why it was sold for $8 million. Is there some additional reasoning for that, or is that the going rate for Ecuadorian assets?

Speaker #5: Because that seems kind of low if you compare it to U.S. market comps.

Speaker #4: Got it. So, I'll tackle the first question. And Orlando, I'm going to tackle the second question. But on the first question on the NCIB, there are two rules associated with the NCIB.

Rene Burgos-Diez: Got it. So I'll tackle the first question, and then I'll tackle the second question. But on the first question on the NCIB, there are two rules associated with the NCIB as to how much we can buy. One is the one limited by our floats, and the second one is limited by our daily volume. Our daily volume historically has been close to, I think it's about, I'll call it 100, 150,000 shares. And we're limited to buying up to 20% of that volume on a daily basis. We've instructed our BMO, our advisor, into the SIB process to buy, you know, shares on a daily basis to try and hit that limit. But in essence, we're somewhat limited as to how many shares we can buy by the nature of the NCIB program itself.

Speaker #4: As to how much we can buy, one is the one limited by our float, and the second one is limited by our daily volume.

Speaker #4: Our daily volume historically has been close to, I think it's up to 150,000 shares, and we're limited to buying up to 20% of that volume on a daily basis.

Speaker #4: We've instructed our BNR advisor and entered into the SAB process to buy shares on a daily basis, trying to hit that limit. In essence, we're somewhat limited as to how many shares we can buy.

Speaker #4: By the nature of the NCIB program itself, and that's what we also see, you know, in what we do for the benefit of all our shareholders. We do see significant SIBs where we're not limited on size, but rather we just provide an offer for every shareholder to participate.

Rene Burgos-Diez: And that's why we also do see, you know, the, and what we do for the benefit of all our shareholders, we do these significant NCIBs where we're not limited on size, but rather we just provide an offer for every shareholder to participate in a matter that is, you know, equivalent. On the Ecuador sale, what I would say, look, I can't even talk about focus on our core operations, our higher impact operations, which is Colombia. You know, our goal and dream on Ecuador was to make it a material operation. The reality is that despite our best efforts, it never reached materiality. I mean, we were we were aiming to get this to be an operation of $5,000 plus, but we were struggling to keep it over $2.

Speaker #4: In a matter that is, you know, equivalent. On the Ecuador sale, what I would say, look, I think this helps us focus on our core operations, our higher impact operations, which is Colombia.

Speaker #4: You know, our goal and dream in Ecuador was to make it a venture operation. The reality is that, despite our best efforts, in our rich materiality—I mean, we were able to get this to be an operation of over 5,000 barrels plus—but we were struggling to keep it over 2.

Speaker #4: So, as a result of that, we made the decision to move on and really focus on the assets that are delivering our portfolio. I would like to highlight that if you exclude our equity in operations, over the last six months, compared to last year, our production is actually up in Colombia around 4% or 5%, excluding Ecuador, right?

Rene Burgos-Diez: As a result of that, we made the decision to move on and really focus on the assets that are delivering our portfolio. I would like to highlight that if you include our our our Ecuadorian operations over the last six months compared to last year, our production is actually up in Colombia around, you know, 4% or 5%, excluding Ecuador. Right? So we continue to kind of drive home the the economic value of our assets in Colombia, trying to get a lot more, you know, cost savings to really kind of drive that value.

Speaker #4: So, we continue to kind of drive home the economic value of our assets in Colombia, trying to get a lot more cost savings to really kind of drive that value.

Speaker #2: And to be consistent with our mantra of value, value over volumes. So, I think that is, I mean, that is also consistent with that, and René said to concentrate on the Colombian assets.

Orlando Cabrales: And to be consistent with with our mantra of value over volumes. No. So I think that is, I mean, that disposal is is consistent with that, and as Rene said, concentrated on on the on the Colombian assets.

Speaker #5: Okay, thank you for taking my questions.

Sarah Constantine: Okay. Thank you for taking my questions.

Speaker #4: Absolutely.

Rene Burgos-Diez: Absolutely.

Speaker #1: Thank you. Your next question comes from Peter Bowley from Jefferies. Please go ahead.

Sergio: Thank you. Your next question comes from Peter Bowling from Jefferies. Please go ahead.

Speaker #6: Hi, thank you for the presentation and for taking my question. In the MD&A, you mentioned the company may consider other strategic initiatives or transactions to enhance value.

Peter Bowling: Hi. Thank you for the presentation and taking my question. In the MD&A you mentioned, the company may consider may be considering other strategic initiatives or transactions to enhance value. So, you know, in the context after divesting Ecuador, could you share a bit more color on what kinds of initiatives or transactions you might be considering? Is this like acquisitions, divestments, JVs? And, you know, would geographic focus continue to be mainly on Colombia, or would you be considering other geographies?

Speaker #6: So, you know, in the context after divesting Ecuador, could you share a bit more color on what kinds of initiatives or transactions you might be considering?

Speaker #6: Is this related to acquisitions, divestments, and joint ventures? And, you know, would the geographic focus continue to be mainly on Colombia, or would you be considering other geographies?

Speaker #2: No, thank you for the question. I would start by saying that our current portfolio provides some very, very important opportunities. Just to take the Kipa block, we have been working on the Sahara project, which is going to increase the water handling of the field.

Orlando Cabrales: No, I thank you for the question. I would start by by by saying that that our current portfolio provides some very, very important opportunities. Just to take the the the Quipa and the Quipa block, we have been working on on the on the Saara project, which is going to increase the the water handling of the of the field, which is currently being being implemented. And that provides, I mean, additional opportunities for growth in the in the in the Quipa block, as well as with the CP6 block, where we we have been increasing also the water handling capacity of the field up to 380,000 barrels of water per day. And that will allow us to increase further production in in that block.

Speaker #2: Which is currently being implemented. And that provides, I mean, additional opportunities for growth in the Kipa block. As well as with the CP6 block, where we have been increasing also the water handling capacity of the field up to 380 thousand barrels of water per day.

Speaker #2: And that will allow us to increase further production in that block. Not to mention the Sabanero field, which is also a heavy oil field in a similar location, close to Kipa.

Orlando Cabrales: And not to mention the Sabanero field, which is also a heavy oil field in the in the same similar, I mean, location, the close location to Quipa. Our production there has been, I mean, higher than what we have expected. So those are, I mean, good opportunities in our heavy oil fields, which provides, opportunities for for growth. The other one is, as we as we mentioned, the Guaco well in the Bin One block. That is a, that is a, I mean, very good opportunity. As we said, during the quarter, we start again, selling, gas cells to to the market and taking advantage of the of the of the window of opportunity we have in the gas market in Colombia where prices are going up, in a very significant way. we we are working with with our partner, Paris to to to order development in that area.

Speaker #2: Our production there has been, I mean, higher than what we have expected. So, those are, I mean, good opportunities in our heavy oil fields, which provide opportunities for growth.

Speaker #2: The other one is, as we mentioned, the Guapowell in the Binwam block. That is, I mean, a very good opportunity. As we said, during the quarter, we start again selling gas cells to the market.

Speaker #2: Taking advantage of the window of opportunity we have in the gas market in Colombia, where prices are going up in a very significant way, we are working with our partner, Paris, to afford the development in that area.

Speaker #2: So, that is another one which I think that provides opportunity. And as you said, I mean, regarding any other potential acquisitions or M&A opportunities, I mean, we are always, I mean, always looking for those opportunities to enhance value for all our stakeholders.

Orlando Cabrales: So that is another one which which which I think that provides some opportunity. And as you said, I mean, regarding any any other potential, acquisitions or M&A opportunities, I mean, we are always, I mean, always looking for for for those opportunities to enhance, value for all all all our stakeholders. and would consider, any any opportunities that make sense to to our to our shareholders and and stakeholders.

Speaker #2: And we would consider any opportunities that make sense to our shareholders and stakeholders.

Speaker #1: Great, thank you. Thank you. Ladies and gentlemen, as a reminder, if you have a question, please first start with one. Your next question comes from Giorgio Sergei Olshakov from Stifel. Please go ahead.

Rene Burgos-Diez: Great. Thank you.

Sergio: Thank you. Ladies and gentlemen, as a reminder, if you have a question, please press star one. Your next question comes from Sergei Bolshekov from Stifel. Please go ahead.

Speaker #6: Hi, guys. Thanks very much for the presentation. I have a couple of questions here. It looks like we've seen a buildup in receivables over the quarter.

Sergei Bolshekov: Hi, guys. Thanks very much for the presentation. I have a couple of questions here. It looks like we've seen a build-up in receivables over the quarter, which have negatively impacted the working capital. If you can elaborate on this a little bit, I think we would also appreciate if you can disclose the cash taxes for the first and the second quarter. And given quite a large cash balance, what are your intentions in terms of keeping this cash balance, potentially buying back some bonds? And if you can, you know, tell us a little bit more about how you think about the outstanding bond, given that it's trading at pretty low levels in terms of cash prices. The refinancing of this bond seems highly unlikely today, at least. Thank you very much.

Speaker #6: Which have negatively impacted the working capital. If you could elaborate on this a little bit, I think we would also appreciate it if you could disclose the cash taxes for the first and the second quarter.

Speaker #6: Given quite a large cash balance, what are your intentions in terms of keeping this cash balance? Potentially buying back some bonds? And if you can, tell us a little bit more about how you think about the outstanding bond, given that it's trading at pretty low levels.

Speaker #6: In terms of cash prices, the refinancing of this bond seems highly unlikely. Today, at least. Thank you very much.

Speaker #4: All right, I think I have a couple of questions there. On the receivables, I think we have a VAT receivable of about $20 million that we were expecting to receive this quarter, but it got pushed out.

Rene Burgos-Diez: All right. I think I have a couple of questions there. On the receivables, I think we have a VAT receivable of about $20 million that we were expecting to receive this quarter on behalf of our staff. We do have other income taxes receivables that's related to our deferred tax asset values that we expect to receive later this year. So that's why you see the working capital moving positive. I think the shift was roughly $50 million on a quarter-over-quarter basis. And I think those two assets on their own somewhat reflect that. As to your questions on our cash position, we sit with about $197 million of cash, of which 184 is unrestricted. You got to remember of that 184, you dropped roughly $66 million because we just closed the SIB in July. So those numbers do not reflect that SIB program.

Speaker #4: We do have other income tax receivables that are related to our deferred tax asset values that we expect to receive later this year. So, that's why you see the working capital moving positively.

Speaker #4: I think the shift was roughly $50 million on a quarter-over-quarter basis. And I think those two assets on their own somewhat reflect that.

Speaker #4: As to your question on our cash position, we sit with about $197 million in cash, of which $184 million is unrestricted. You have to remember that, of the $184 million, you should subtract roughly $66 million because we just closed the SIB in July.

Speaker #4: So, those numbers do not reflect the SIB program. As for the bond and plans for the bond, look, we had really great conversations over the last, I would say, three to four months with our bondholders.

Rene Burgos-Diez: As to the bond and plans with the bond, look, we had really great conversations over the last, I would say, three, four months with our bondholders. We communicated our strategies. I think Orlando just highlighted some of the opportunities that are available, not to include other opportunities that, of course, could emerge because of the current market environment. So right now, our focus is on delivering on the business. We still have another three years left of our bond maturity. We will continue to be opportunistic regarding bond purchases, but at this time, our focus is on delivering on the promise of the business, which is to maximize value for our stakeholders.

Speaker #4: We communicated our strategy. I think Orlando just highlighted some of the opportunities that are available, not to include other opportunities that, of course, could emerge.

Speaker #4: Because of the current market environment, our focus is on delivering on the business. We still have another three years left until our bond maturity.

Speaker #4: We will continue to be opportunistic regarding bond purchases, but at this time our focus is on delivering on the permits for the business, which is to maximize value for our stakeholders.

Speaker #2: And I would add, I would add to that, that, I mean, of course, we will consider that. Any decision would be made based on the overall results of the business, the oil prices, and the cash flow generation of the business.

Orlando Cabrales: And I would I would add I would add to that that, I mean, of course, I mean, we will consider that. And any decision would be would be made based on the overall results of the business, the oil findings, the cash flow generation of the business. So that absolutely, as Rene said, we have been, I mean, as we have demonstrated and we have delivered on it, we will be very open to consider additional initiatives like that one.

Speaker #2: So, but absolutely, as René said, we have been, I mean, as we have demonstrated, and we have delivered on it. We will be very open to consider additional initiatives like that.

Speaker #1: That's great, thanks very much. And in terms of cash taxes, for the first and the second quarters this year?

Sergei Bolshekov: That's great. Thanks very much. And in terms of cash taxes for the first and the second quarter of this year?

Speaker #4: Look, you can take a look at our, we have one particular line. There are two ways in which we pay taxes, Sergei. So, it's the one we kind of settle up at the end of the year, and then you have monthly.

Rene Burgos-Diez: Look, you can take a look at our and you have one particular line. So there's two ways that we pay taxes, Sergei. So the one we kind of settle up at the end of the year, and then you have monthly we have the holding taxes. But I think the best way to explain it is we roughly pay 5.6% of our growth sales. So I think if you add up the year, and I think our relationship, you know, approximately, you know, about 400, 500, you can multiply that times that 5%, 6%, and that's what you get to that number. But it's within our cash flow statement. So call it should be anywhere from, you know, $30 million or something like that we paid. And that's growth before the returns.

Speaker #4: We have the closing taxes. I think the best way to explain it is that we roughly pay 5% to 5.6% of our gross sales. So, if you add up the year, and I think our revenue, since you posted, you know, $400 million to $500 million, you can multiply that times 5% or 6%, and that's how you get to that number.

Speaker #4: But within our cash flow statement, so probably should be anywhere from, you know, $30 million or something like that we paid. But that's, and that's growth before the returns.

Speaker #1: Thank you. Thanks. Thank you. There are no further questions at this time. I'll turn it over to management for closing remarks.

Sergei Bolshekov: Thank you. Thanks.

Sergio: Thank you. There are no further questions at this time. I'll turn it over to management for closing remarks.

Speaker #2: No, thank you. Thank you, everybody, for attending the call. Have a good day. Thank you, everybody.

Orlando Cabrales: Well, thank you. Thank you, everybody, for attending the call and have a good day. Thank you, Gabriel.

Sergio: Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.