Delivered EBITDA Of $132.8 Million,
Reiterate 2022
Operating EBITDA Guidance Of $575-$625 Million
At $90 Per Bbl Brent,
Every Additional $10/Bbl Increase in
Brent Price Average for the Year Equals $100
Million Additional EBITDA As The Company Has Uncapped
Exposure to Higher Oil Prices
Increased Production By 6.5% To 41,100
Boe/d
Increased Inventory By 627,050 Bbls To
1,434,111 Bbls Which Will Be Sold In Subsequent Quarters
Recorded Net Income Of $102.2
Million
Increased Operating Netback By 22% To
$59/Boe And Net Sales Realized Price
By 17% To $81.66/Boe
Renewed NCIB Program For The Purchase Of
Approximately 10% Of The Public Float
Recognized By Ethisphere As One Of The 2022
World's Most Ethical Companies For The Second Straight Year
Discovered Light And Medium Crude Oil At The
Jandaya-1 And Tui-1 Exploration Wells In Ecuador
CGX And Frontera To Host Informational Virtual
Presentation On May 9, 2022 On The
Guyana-Suriname Basin, The Offshore Corentyne Block, Integrated
Kawa-1 Exploration Well Results And Insights Ahead Of The Wei-1
Exploration Well
CALGARY,
AB, May 3, 2022 /CNW/ - Frontera Energy
Corporation (TSX: FEC) ("Frontera'' or the "Company") today
reported financial and operational results for the first quarter
ended March 31, 2022. All financial
amounts in this news release are in United States dollars, unless otherwise
stated.
Gabriel de Alba, Chairman of
the Board of Directors, commented:
"Frontera continued to deliver strong performance results in
the first quarter of 2022 in-line with full year production
guidance of 40,000-43,000 boe/d and annual EBITDA guidance of
$575-$625
million at $90/bbl Brent. As
the Company has uncapped exposure to higher oil prices, every
$10/Bbl increase in average Brent
price for the year equals approximately $100
million additional EBITDA. Frontera expects our first
quarter operational momentum to continue throughout the rest of the
year which is expected to drive higher production and profitability
in subsequent quarters.
The Company recently renewed its NCIB program for the
purchase of up to 10% of our public float and is reviewing other
opportunities to enhance shareholder returns. Importantly, Frontera
was recognized for the second straight year by Ethisphere as one of
the 2022 World's Most Ethical Companies and the Company was
certified by Great Place to Work as the only oil and gas company
with an outstanding work environment. Frontera was also recognized
as one of the best places to work for women in Colombia among the 2021 GPTW ranking."
Orlando Cabrales, Chief
Executive Officer (CEO), Frontera, commented:
"Frontera reported strong financial results in the first
quarter of 2022. We increased production by 6.5% to 41,100 boe/d,
recorded net income of $102.2
million, increased our operating netback by 22% and our net
sales realized price by 17%. We delivered EBITDA of $132.8 million, down quarter over quarter due to
the timing of cargo sales in Q1 impacting volumes sold in
Colombia and an increase in
inventory which will be sold in subsequent quarters according to
nomination and scheduling of cargos.
Operationally, we executed $113.5
million in capital expenditures on the Kawa-1 exploration
well in Guyana, on discoveries at
the Jandaya-1 and Tui-1 exploration wells in Ecuador and we maintained a high-level of
execution of development drilling in our base Colombia operations. During the quarter, we
began integrating the PetroSud assets into our operations, which we
anticipate will contribute to achieving the Company's production
guidance. Subsequent to the quarter, Frontera completed the
acquisition of PCR's 35% working interest in Colombia's El Dificil block. Frontera now
holds a 100% working interest in the El Dificil block which, when
combined with our acquisition of PetroSud's interests in Entrerrios
and Rio Meta Blocks, will generate approximately US$12-$15 million
of annual EBITDA. The Company hedged 40% of its 2022 production at
$70/bbl floors with full upside
exposure and also completed 100% of its foreign exchange hedges for
2022 to protect downside and allow for upside exposure. Finally,
the Company is reviewing opportunities for increased production in
the second half of the year."
First Quarter 2022 Operational and Financial Summary
|
|
|
|
|
|
|
Q1
2022
|
Q4
2021
|
Q1
2021
|
|
|
|
|
|
Operational
Results
|
|
|
|
|
|
|
|
|
|
Heavy
crude oil production (1)
|
(bbl/d)
|
21,214
|
20,912
|
20,997
|
Light and
medium crude oil production (1)
|
(bbl/d)
|
17,248
|
16,300
|
18,294
|
Total
crude oil production
|
(bbl/d)
|
38,462
|
37,212
|
39,291
|
Conventional natural gas production (1)
|
(mcf/d)
|
9,530
|
4,663
|
5,227
|
Natural
gas liquids production (1)
|
(boe/d)
|
966
|
575
|
391
|
Total production
(2)
|
(boe/d)
(3)
|
41,100
|
38,605
|
40,599
|
|
|
|
|
|
Inventory
Balance
|
|
|
|
|
Colombia
|
(bbl)
|
937,583
|
326,861
|
602,536
|
Peru
|
(bbl)
|
480,200
|
480,200
|
580,499
|
Ecuador
|
(bbl)
|
16,328
|
–
|
–
|
Total
Inventory
|
(bbl)
|
1,434,111
|
807,061
|
1,183,035
|
|
|
|
|
|
Oil and
gas sales, net of purchases (4)
|
($/boe)
|
90.42
|
75.12
|
58.18
|
Realized
(loss) gain on risk management contracts
|
($/boe)
|
(1.06)
|
(1.87)
|
(3.53)
|
Royalties
|
($/boe)
|
(7.58)
|
(3.62)
|
(1.96)
|
Dilution
costs
|
($/boe)
|
(0.12)
|
(0.10)
|
(2.25)
|
Net sales realized
price (5)
|
($/boe)
|
81.66
|
69.53
|
50.44
|
Production
costs (6)
|
($/boe)
|
(13.48)
|
(12.71)
|
(10.06)
|
Transportation costs (7)
|
($/boe)
|
(9.74)
|
(9.02)
|
(11.30)
|
Operating netback
(4)
|
($/boe)
|
58.44
|
47.80
|
29.08
|
|
|
|
|
|
Financial
Results
|
|
|
|
|
|
|
|
|
|
Oil and gas sales, net
of purchases
|
($M)
|
229,569
|
269,525
|
180,956
|
Realized
(loss) gain on risk management contracts
|
($M)
|
(2,682)
|
(6,692)
|
(10,980)
|
Royalties
|
($M)
|
(19,244)
|
(12,974)
|
(6,110)
|
Dilution
costs
|
($M)
|
(298)
|
(368)
|
(6,983)
|
Net sales
(4)
|
($M)
|
207,345
|
249,491
|
156,883
|
Net income
(loss)(8)
|
($M)
|
102,228
|
629,376
|
(14,126)
|
Per share
– basic
|
($)
|
1.08
|
6.60
|
(0.14)
|
Per share
– diluted
|
($)
|
1.05
|
6.40
|
(0.14)
|
General and
administrative
|
($M)
|
14,656
|
12,144
|
13,202
|
Operating EBITDA
(4)
|
($M)
|
132,770
|
148,323
|
69,158
|
Cash provided by
operating activities
|
($M)
|
114,980
|
113,482
|
47,393
|
Capital
expenditures
|
($M)
|
113,545
|
135,458
|
14,365
|
Cash and
cash equivalents - unrestricted
|
($M)
|
257,373
|
257,504
|
248,237
|
Restricted
cash short and long-term
|
($M)
|
66,146
|
63,321
|
161,230
|
Total cash
|
($M)
|
323,519
|
320,825
|
409,467
|
Total debt and lease
liabilities
|
($M)
|
558,281
|
560,135
|
534,656
|
Consolidated total
indebtedness (Excl. Unrestricted Subsidiaries)
(4)(9)
|
($M)
|
410,161
|
416,883
|
361,699
|
Net Debt (Excluding
Unrestricted Subsidiaries) (4)(9)
|
($M)
|
199,303
|
207,578
|
139,327
|
|
1. References to heavy
crude oil, light and medium crude oil combined, natural gas
liquids, or conventional natural gas production in the above table
and elsewhere in this news release refer to the heavy crude oil,
light and medium crude oil combined, natural gas liquids, and
conventional natural gas, respectively, product types as defined in
National Instrument 51-101 - Standards of Disclosure for Oil and
Gas Activities ("NI 51-101").
|
2. Represents W.I.
production before royalties. Refer to the "Further Disclosures"
section on page 24 of the management's discussion and analysis for
the three months ended March 31, 2022 (the
"MD&A").
|
3. Boe has been
expressed using the 5.7 to 1 Mcf/bbl conversion standard required
by the Colombian Ministry of Mines & Energy. Refer to the
"Further Disclosures - Boe Conversion" section on page 24 of the
MD&A.
|
4. Non-IFRS financial
measure. Refer to the "Non-IFRS Measures" section on page 10 of
this news release and page 15 of the MD&A. This section also
includes a description and details for all per boe metrics included
in operating netback.
|
5. Per boe is
calculated using sales volumes, excluding volumes purchased from
third parties.
|
6. Per boe is
calculated using production.
|
7. Per boe is
calculated using net production after royalties.
|
8. Net income (loss)
attributable to equity holders of the Company.
|
9. "Unrestricted
Subsidiaries" include CGX Energy Inc. ("CGX"), Frontera ODL Holding
Corp., including its subsidiary Pipeline Investment Ltd., Frontera
BIC Holding Ltd., Frontera Bahía Holding Ltd., including its
subsidiary Sociedad Portuaria Puerto Bahía S.A..
|
First Quarter Operational and Financial Results:
- Production averaged 41,100 boe/d, up 6.5% compared to 38,605
boe/d in the prior quarter and 40,599 boe/d in the first quarter of
2021. See the table above for production by product type for the
prior quarter and first quarter of 2021. Frontera's daily
production on May 2, 2022 was
approximately 41,900 boe/d (consisting of approximately 22,100
bbl/d of heavy crude oil, 16,800 bbl/d of light and medium crude
oil, 11,400 mmcf/d of conventional natural gas and 1,000 bbl/d of
natural gas liquids). The Company's year-to-date average to
May 2, 2022 was approximately 41,300
boe/d (consisting of approximately 21,500 bbl/d of heavy crude oil,
17,100 bbl/d of light and medium crude oil, 9,700 mmcf/d of
conventional natural gas and 1,000 bbl/d of natural gas
liquids).
- Operating EBITDA was $132.8
million in the first quarter of 2022 compared with
$148.3 million in the prior quarter
and $69.2 million in the first
quarter of 2021. The decrease in operating EBITDA quarter over
quarter was due to the timing of cargos which impacted volumes sold
in Colombia resulting in an
inventory build, while benefiting from higher Brent oil prices. The
Company reiterates its 2022 operating EBITDA guidance of
$575-$625
Million at $90/bbl Brent.
- The Company reported a total cash position of $323.5 million at March
31, 2022 compared to $320.8
million at December 31,
2021.
- The Company's restricted cash position was $66.1 million at March 31,
2022 compared to $63.3 million
at December 31, 2021. The Company
anticipates releasing additional restricted cash in 2022 as the
Company continues to optimize its credit lines.
- Cash provided by operating activities was $115.0 million in the first quarter of 2022,
compared with $113.5 million in the
prior quarter and $47.4 million in
the first quarter of 2021.
- At March 31, 2022, the Company
had a total inventory balance of 1,434,111 bbls compared to 807,061
bbls at December 31, 2021. The
increase in inventory balance in the first quarter is a result of
one less cargo sold during the first quarter compared to the
previous quarter which the Company expects will be sold in
subsequent quarters.
- The Company has various uncommitted bilateral credit lines. As
of March 31, 2022, the Company had
increased its uncollateralized credit lines to $106.9 million, an increase of $17.3 million compared to December 31, 2021.
- On March 15, 2022, Frontera
announced plans to renew its Normal Course Issuer Bid
("NCIB") for the purchase of up to 4,787,976 common shares,
representing ~10% of the Company's public float during the 12-month
period commencing March 17, 2022, and
ending March 16, 2023. As of
May 2, 2022, Frontera has purchased
for cancellation 1,246,400 common shares at a volume weighted
average price of C$14.39 per share,
excluding brokerage fees. Under the Company's previous NCIB that
expired on March 16, 2022, Frontera
purchased for cancellation 4,243,600 common shares at a volume
weighted average price of C$7.38 per
share, excluding brokerage fees.
- Capital expenditures were $113.5
million in the first quarter of 2022, compared with
$135.5 million in the prior quarter
and $14.4 million in the first
quarter of 2021. Capital expenditures during the quarter included
exploration activity in support of the Kawa-1 exploration well,
offshore Guyana, light and medium
crude oil discoveries in Ecuador
at the Jandaya-1 and Tui-1 exploration wells and maintaining a
high-level of execution of development drilling in the Company's
base Colombia operations.
- The Company recorded net income of $102.2 million or $1.08/share in the first quarter of 2022,
compared with net income of $629.4
million or $6.60/share in the
prior quarter and a net loss of $14.1
million or $0.14/share in the
first quarter of 2021. The decrease in net income quarter over
quarter was mainly due to an impairment reversal of $586.7 million that occured in the fourth quarter
of 2021.
- The Company's operating netback was $58.44/boe, up 22% compared with $47.80/boe in the prior quarter and $29.08/boe in the first quarter of 2021 primarily
due to higher net sales realized prices, partially offset by higher
production costs.
- The Company's net sales realized price was $81.66/boe in the first quarter of 2022, up 17%,
compared to $69.53/boe in the prior
quarter and $50.44/boe in the first
quarter of 2021. The increase was mainly the result of higher Brent
benchmark prices, lower differentials compared with the previous
quarter, lower loss on risk management contracts (first quarter
2022 only includes premiums paid for the position expired during
the period), and reduction in dilution costs due to replacement of
the dilution service by volumes purchased, partially offset by
higher cash royalties resulting from oil price increases.
- Production costs averaged $13.48/boe in the first quarter of 2022, compared
with $12.71/boe in the prior quarter
and $10.06/boe in the first quarter
of 2021. The increase in production costs was mainly due to
increased energy costs which added approximately $1.50/bbl, additional well services and
maintenance costs.
- Transportation costs averaged $9.74/boe, compared with $9.02/boe in the prior quarter and $11.30/boe in the first quarter of 2021. The
increase in transportation costs was mainly due to one-time prepaid
services recorded as lower transportation costs during the fourth
quarter of 2021 following the implementation of the conciliation
agreement entered into with Oleoducto Bicentenario de Columbia
S.A.S. and Cenit Transporte y Logistica de Hidrocaburos S.A.S. to
resolve certain transportation dispute.
- The Company recorded a realized loss on risk management
contracts of $2.7 million in the
first quarter of 2022 compared with a realized loss of $6.7 million in the prior quarter and a loss of
$11 million in the first quarter of
2021. The realized loss on risk management contracts was primarily
due to cash paid for the purchase of put options during the
quarter. Subsequent to March 31,
2022, the Company entered into new put hedges totaling
1,410,000 bbls to protect the Company's 2022 capital program at a
$70/bbl strike price. The Company's
2022 hedges do not cap upside price potential. See the Hedging
Update section below for more information.
- On March 15, 2022, Frontera was
recognized for the second straight year by Ethisphere, a global
leader in defining and advancing the standards of ethical business
practices, as one of the 2022 World's Most Ethical Companies.
Frontera is the only honouree in the Oil and Gas, Renewables
category. In 2022, 136 honourees were recognized spanning 22
countries and 46 industries. Additionally, Frontera was certified
by Great Place to Work ("GPTW") as the only oil and gas company
with an outstanding work environment. Frontera was also recognized
as one of best places to work for women in Colombia among the 2021 GPTW ranking.
Operational Update
Guyana
CGX and Frontera to Host Informational Virtual
Presentation
On May 9, 2022, at 11:00 am ET, senior operational and technical
team members from CGX and Frontera will host a virtual
informational presentation on the Guyana-Suriname basin, the
offshore Corentyne block, integrated Kawa-1 exploration well
results and insights ahead of the Wei-1 exploration well.
Participants are encouraged to submit questions in advance to
info@cgxenergy.com or ir@fronteraenergy.ca. Questions
may also be submitted during the informational presentation. The
Joint Venture cordially invites all shareholders, stakeholders,
investors and media to attend the virtual presentation.
To join the presentation, visit:
https://produceredition.webcasts.com/starthere.jsp?ei=1546107&tp_key=5a50c6fca1
CGX continues to assess several strategic opportunities to
obtain additional financing to meet the costs of the drilling
program.
Colombia
Frontera's production increase of 6.5% or 2,495 boe/d compared
to the prior quarter was a result of organic growth across the
portfolio and 1,226 boe/d (consisting of 4,874 Mcf/d of
conventional natural gas, 324 bbl/d of light and medium crude
oil, and 47 bbl/d of natural gas liquids) added through the
completion of 100% of the shares of Petroleos Sud Americanos S.A.
("PetroSud") on December 30,
2021. Growth in natural gas liquids production mainly at the
VIM-1 block, increased light and medium crude oil production mainly
from the Guatiquia block, and increased heavy crude oil mainly in
CPE-6 block delivered additional production volumes during the
quarter.
Currently, the Company has four drilling rigs and four workover
rigs active at its operations in Colombia and one rig at the Perico block in
Ecuador. In the first quarter of
2022, the Company drilled 14 development wells in Colombia and one exploration well in
Ecuador, and completed 38
workovers and well services.
Production at Key Fields
At Quifa, current production is approximately 17,000 bbl/d of
heavy crude oil (including both Quifa and Cajua). The Company
drilled 12 development wells at Quifa in the first quarter of
2022.
At Guatiquia, current production is approximately 8,800 bbl/d of
light and medium crude oil. In the first quarter of 2022, Frontera
initiated production from the Coralillo-15 and Coralillo-13
development wells. Subsequent to the quarter, the Coralillo SE-01
well was completed in the Lower Sand and Barco formations and a
production test is underway.
At CPE-6, current production is approximately 4,700 bbl/d of
heavy crude oil. In the first quarter, the Company drilled the
HAM-102D well, which is currently under evaluation.
At VIM-1 (Frontera 50% W.I., non-operator), current production
is approximately 1,300 boe/d, consisting of approximately 3,100
mmcf/d of conventional natural gas and 750 bbl/d of natural gas
liquids. In the first quarter of 2022, the operator completed
the construction of gas processing facilities which are expected to
be operational in the second quarter. Additionally, the operator
anticipates spudding the La Belleza-2 development well in the
second quarter.
Subsequent to the quarter, on April 27,
2022, Frontera completed the previously announced
acquisition of the 35% working interest ("W.I.") in
Colombia's El Dificil block held
by PCR Investments S.A. (a wholly-owned subsidiary of Petroquímica
Comodoro Rivadavia S.A. ("PCR")) for a total aggregate cash
consideration of approximately US$13
million. The PCR transaction was subject to customary
closing conditions and approval of the transaction by the Agencia
Nacional de Hidrocarburos which has now been received.
Ecuador
During the quarter, Frontera announced that it had made
discoveries at the Jandaya-1 and Tui-1 exploration wells on the
Perico block (Frontera 50% W.I. and operator) in Ecuador. The Jandaya-1 well encountered a
total of 78 feet of net pay across three hydrocarbon bearing
reservoirs. The Tui-1 exploration well encountered a total of 125
feet of net pay across seven hydrocarbon bearing reservoirs.
Production from the Jandaya-1 and Tui-1 exploration wells is being
delivered to a nearby access point on Ecuador's main pipeline system for sale to
export markets and the first parcel from this production will be
exported in May. Frontera and its partner are currently evaluating
subsequent activities in the Perico block, including a potential
development drilling plan for both the Jandaya and Tui fields.
Production in Ecuador for the
three months ended March 31, 2022,
was 279 bbl/d of light and medium crude oil.
In the Espejo block, (Frontera 50% W.I. and non-operator), the
Company is currently acquiring 60 sq km of 3D seismic and
anticipates spudding the first exploration well on the block,
called the Espejo Norte-1, in the second half of 2022.
Hedging Update
As part of its risk management strategy, the Company uses
derivative commodity instruments to manage exposure to price
volatility by hedging a portion of its oil production. The
Company's strategy aims to protect 40%-60% of the estimated
production to protect the revenue generation and cash position of
the Company while maximizing upside. In 2022, Frontera is
only using put options, which allows the Company to capture the
full upside price benefit while offering efficient downside
hedging. The following table summarizes Frontera's hedging position
as of April 26, 2022.
Term
|
Type of
Instrument
|
Open Positions
(bbl/d)
|
Strike Prices
Put/ Call
|
April
|
Put
|
14,833
|
70
|
May
|
Put
|
14,839
|
70
|
June
|
Put
|
14,833
|
70
|
2Q-2022
|
Total
Average
|
14,835
|
|
July
|
Put
|
15,833
|
70
|
August
|
Put
|
15,484
|
70
|
September
|
Put
|
15,333
|
70
|
3Q-2022
|
Total
Average
|
15,380
|
|
October
|
Put
|
15,484
|
70
|
November
|
Put
|
15,333
|
70
|
December
|
Put
|
15,161
|
70
|
4Q-2022
|
Total
Average
|
15,326
|
|
First Quarter 2022 Conference Call Details
A conference call for investors and analysts will be held on
May 4, 2022 at 11:30 a.m. Eastern Time. Participants will
include Gabriel de Alba, Chairman of
the Board of Directors, Orlando
Cabrales, Chief Executive Officer, Alejandro Piñeros, Chief Financial Officer and
other members of the senior management team.
Analysts and investors are invited to participate using the
following dial-in numbers:
Participant Number (Toll Free North America): 1-888-256-1007
Participant Number (Toll Free Colombia): 01-800-518-3328
Participant Number (International): 1-647-484-0478
Conference ID: 1655563
Webcast Audio: www.fronteraenergy.ca
A replay of the conference call will be available until
11:59 p.m. Eastern Time on
May 11, 2022.
Encore Toll free Dial-in Number: 1-647-436-0148
International Dial-in Number: 1-888-203-1112
Encore ID: 1655563
About Frontera:
Frontera Energy Corporation is a Canadian public company
involved in the exploration, development, production,
transportation, storage and sale of oil and natural gas in
South America, including related
investments in both upstream and midstream facilities. The Company
has a diversified portfolio of assets with interests in 34
exploration and production blocks in Colombia, Ecuador and Guyana, and pipeline and port facilities in
Colombia. Frontera is committed to
conducting business safely and in a socially, environmentally and
ethically responsible manner.
If you would like to receive news releases via email as soon as
they are published, please subscribe here:
http://fronteraenergy.mediaroom.com/subscribe.
Advisories:
Cautionary Note Concerning Forward-Looking
Statements
This news release contains forward-looking information within
the meaning of Canadian securities laws. Forward-looking
information relates to activities, events or developments that the
Company believes, expects or anticipates will or may occur in the
future. Forward-looking information in this news release includes,
without limitation, statements relating to the Company's
expectations regarding increased operational momentum throughout
the rest of the year and its impact on production and profitability
in subsequent quarters; the expected positive impacts from the
ongoing integration of the PetroSud assets into the Company's
operations, including with respect to the Company's anticipated
production profile and annual EBITDA; anticipated exploration,
development and drilling activities, including expectations
regarding anticipated timing for spudding the La Belleza-2 well,
expectations with respect to releasing additional restricted cash
in 2022 and inventory sales in subsequent quarters; seismic
acquisition in Ecuador and the
anticipated timing for spudding the first exploration well on the
Espejo block; and expectations with respect to the Company's
hedging strategy. All information other than historical fact is
forward-looking information.
Forward-looking information reflects the current
expectations, assumptions and beliefs of the Company based on
information currently available to it and considers the Company's
experience and its perception of historical trends, including
expectations and assumptions relating to commodity prices and
interest and foreign exchange rates; the current and potential
impacts of the COVID-19 pandemic, including the status of the
pandemic and future waves and any associated policies around
current business restrictions; the performance of assets and
equipment; the availability and cost of labour, services and
infrastructure; the execution of exploration and development
projects; the receipt of any required regulatory approvals and
outcome of discussions with governmental authorities; and the
success of the Company's hedging strategy.
Although the Company believes that the assumptions inherent
in the forward-looking information are reasonable, forward-looking
information is not a guarantee of future performance and
accordingly undue reliance should not be placed on such
information. Forward-looking information is subject to a number of
risks and uncertainties, some that are similar to other oil and gas
companies and some that are unique to the Company. The actual
results may differ materially from those expressed or implied by
the forward-looking information, and even if such actual results
are realized or substantially realized, there can be no assurance
that they will have the expected consequences to, or effects on,
the Company. The Company's annual information form dated
March 2, 2022, its annual
management's discussion and analysis for the year ended
December 31, 2021, and other
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 and such
factors are incorporated herein by reference. Copies of these
documents are available without charge by referring to the
company's profile on SEDAR at www.sedar.com. All forward-looking
information speaks only as of the date on which it is made and,
except as may be required by applicable securities laws, the
Company disclaims any intent or obligation to update any
forward-looking information, whether as a result of new
information, future events or results or otherwise.
Certain information included in this news release may
constitute future oriented financial information and financial
outlook information (collectively, "FOFI") within the meaning of
applicable Canadian securities laws. The FOFI has been prepared by
management to provide an outlook of the Company's activities and
results and may not be appropriate for other purposes. Management
believes that the FOFI has been prepared on a reasonable basis,
reflecting management's reasonable estimates and judgments;
however, actual results of the Company's operations and the
resulting financial outcome may vary from the amounts set forth
herein. Any FOFI speaks only as of the date on which it was made,
and the Company disclaims any intent or obligation to update any
FOFI, whether as a result of new information, future events or
otherwise, unless required by applicable laws.
Non-IFRS Financial Measures
This news release contains financial terms that do not have
standardized definitions in International Financial Reporting
Standards ("IFRS"): Operating EBITDA, Operating Netback, Net
Sales, Oil and Gas Sales, Net of Purchases, Consolidated Total
Indebtedness and Net Debt. These financial measures, together with
measures prepared in accordance with IFRS, provide useful
information to investors and shareholders, as management uses them
to evaluate the operating performance of the Company. The Company's
determination of these non-IFRS measures may differ from other
reporting issuers, and therefore are unlikely to be comparable to
similar measures presented by other companies. Further, these
non-IFRS measures should not be considered in isolation or as a
substitute for measures of performance or cash flows prepared in
accordance with IFRS.
Operating EBITDA
EBITDA is a commonly used measure that adjusts net income
(loss) as reported under IFRS to exclude the effects of income
taxes, finance income and expenses, and depletion, depreciation and
amortization expense.
Operating EBITDA represents the operating results of the
Company's primary business, excluding the items noted above,
restructuring, severance and other costs, certain non-cash items
(such as impairments, foreign exchange, unrealized risk management
contracts, costs under terminated pipeline contracts, and
share-based compensation) and gains or losses arising from the
disposal of capital assets. In addition, other unusual or
non-recurring items are excluded from operating EBITDA, as they are
not indicative of the underlying core operating performance of the
Company.
A reconciliation of net income (loss) to operating EBITDA is
as follows:
|
Three Months
Ended
March
31
|
($M)
|
2022
|
2021
|
|
|
|
Net income
(loss)
|
102,228
|
(14,126)
|
|
Finance
Income
|
(607)
|
(840)
|
|
Finance
expenses
|
12,235
|
13,587
|
|
Income tax (recovery)
expense
|
(12,751)
|
13,280
|
|
Depletion, depreciation
and amortization
|
38,784
|
32,636
|
|
Impairment, Exploration
Expenses and others
|
(4,429)
|
(5,738)
|
|
Shared-based
compensation non cash portion
|
5,088
|
1,317
|
|
Restructuring,
severance and other costs
|
331
|
381
|
|
Share of income from
associates
|
(9,094)
|
(9,786)
|
|
Foreign exchange (gain)
loss
|
(3,642)
|
18,488
|
|
Other loss,
net
|
6,019
|
9,601
|
|
Unrealized (gain) loss
on risk management contracts
|
(1,144)
|
8,838
|
|
Non-controlling
interests
|
(248)
|
1,520
|
|
Operating
EBITDA
|
132,770
|
69,158
|
|
Operating Netback and Oil and Gas Sales, Net of
Purchases
Operating netback is used to assess the net margin of the
Company's production after subtracting all costs associated with
bringing one barrel of oil to the market. It is also commonly used
by the oil and gas industry to analyze financial and operating
performance expressed as profit per barrel and is an indicator of
how efficient the Company is at extracting and selling its product.
For netback purposes, the Company removes the effects of any
trading activities and results from its midstream segment from the
per barrel metrics. Refer to the reconciliation in the "Operating
Netback" section on page 6 of the MD&A.
Refer to the "Operating Netback and Oil and Gas Sales, Net of
Purchases" section on page 16 of the MD&A for a description of
each component of the Company's operating netback and how it is
calculated.
Oil and gas sales, net of purchases, on a per boe basis is
calculated using oil and gas sales less the cost of volumes
purchased from third parties including its transportation and
refining cost, divided by the total sales volumes from D&P
assets, net of purchases. Refer to the reconciliation in the
"Operating Netback and Oil and Gas Sales, Net of Purchases''
section on page 16 of the MD&A.
Net Sales
Net sales are a non-IFRS subtotal that adjusts revenue to
include realized gains and losses from risk management contracts
while removing the cost of dilution activities. This is a useful
indicator for management as the Company hedges a portion of its oil
production using derivative instruments to manage exposure to oil
price volatility. This metric allows the Company to report its
realized net sales after factoring in these risk management
activities. The deduction for dilution costs and cost of purchases
is helpful to understand the Company's sales performance based on
the net realized proceeds from production net of dilution, the cost
of which is partially recovered when the blended product is sold.
Net sales also exclude sales from port services, as it is not
considered part of the oil & gas segment. Refer to the
reconciliation in the "Sales" section on page 7 of the
MD&A.
Consolidated Total Indebtedness and Net Debt
Consolidated total indebtedness and net debt are used by the
Company to monitor its capital structure, financial leverage, and
as a measure of overall financial strength. Consolidated total
indebtedness is defined as long-term debt, plus liabilities for
leases and net position of risk management contracts, excluding
Unrestricted Subsidiaries. This metric is consistent with the
definition under the Company's Indenture (as defined in the
MD&A) for the calculation of certain conditions and covenants.
Net debt is defined as consolidated total indebtedness less cash
and cash equivalents. Both measures are exclusive of
non-recourse subsidiary debt and certain amounts attributable to
the Unrestricted Subsidiaries. Refer to the reconciliation in the
"Consolidated Total Indebtedness and Net Debt" section on page 17
of the MD&A for additional information about these financial
measures.
Oil and Gas Information Advisories
Reported production levels may not be reflective of
sustainable production rates and future production rates may differ
materially from the production rates reflected in this news release
due to, among other factors, difficulties or interruptions
encountered during the production of hydrocarbons.
This news release includes terms such as "net pay" and
"hydrocarbon bearing reservoir" and variations thereof. Such terms
should not be interpreted to mean there is any level of certainty
in regard to the volume of oil, natural gas or natural gas liquids
present therein, or that such volumes may be produced profitably,
in commercial quantities, or at all.
The term "boe" is used in this news release. Boe may be
misleading, particularly if used in isolation. A boe conversion
ratio of cubic feet to barrels is based on an energy equivalency
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. In this news
release, boe has been expressed using the Colombian conversion
standard of 5.7 Mcf: 1 bbl required by the Colombian Ministry of
Mines and Energy.
Definitions:
bbl(s)
|
Barrel(s) of
oil
|
bbl/d
|
Barrels of oil per
day
|
boe
|
Refer to "Boe
Conversion" disclosure above
|
boe/d
|
Barrel of oil
equivalent per day
|
Mcf
|
Thousand cubic
feet
|
W.I.
|
Working
Interest
|
Net
Production
|
Net production
represents the Company's working interest volumes, net of royalties
and internal consumption
|
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SOURCE Frontera Energy Corporation