Strong Stable Cash Position with Increased
Production Volumes
TORONTO, Nov. 4, 2020 /CNW/ - Frontera Energy
Corporation (TSX: FEC) ("Frontera" or the "Company")
today reported financial and operational results for the third
quarter ended September 30, 2020. All
financial amounts in this news release are in United States dollars, unless otherwise
stated. During the third quarter, the Company acquired control of
Infrastructure Ventures Inc. ("IVI"), the parent company of
Puerto Bahia which owns and operates
a bulk liquid and dry cargo port in Cartagena, Colombia. As a result, the Company now fully
consolidates IVI's results in the Financial Statements, impacting
the comparability of various financial metrics. Please see the
section entitled the Acquisition of Infrastructure Ventures Inc
("IVI") in the Financial Statements for full details.
Third Quarter Operational and Financial Results:
- Third quarter production averaged 43,202 boe/d, all from
Colombia, compared to second
quarter 2020 production of 42,597 boe/d. In August, the Company
brought back online most of the Colombian fields which it had
shut-in earlier in the year. In Peru Block 192, production remained closed
during the third quarter.
- The Company reported a net loss of $90
million ($0.93/share),
compared to a net loss of $68 million
($0.70/share) in the second quarter
of 2020. The loss in 3Q was primarily related to non-cash
adjustments due to the acquisition of IVI.
- Production costs in the third quarter averaged $8.97/boe, compared to $9.03/boe in the second quarter of 2020
reflecting the Company's success in controlling costs in the
current environment.
- Transportation costs averaged $9.89/boe in the third quarter, compared to
$11.28/boe in the second quarter of
2020 largely as a result of the consolidation of IVI. In the third
quarter of 2020, the acquisition of IVI lowered reported
transportation costs by $0.94/boe
compared to the second quarter of 2020. In addition, we have
reclassified $8 million in third
quarter expenses ($20 million
year-to-date 2020) related to non-cash transportation ancillary
contracts to Costs under terminated pipeline contracts.
- General & Administrative Expenses were $10.5 million in the third quarter, compared to
$9.7 million in the second quarter,
reflecting $1.2 million in additional
costs as a result of the IVI consolidation.
- Operating EBITDA was $52 million
compared to $38 million in the second
quarter of 2020. Revenue increased due to sales volumes deferred
from the second quarter (which resulted in an additional cargo in
the third quarter) and improved Brent prices. In addition,
production and transportation costs improved in the quarter.
- Capital expenditures in the third quarter were $3 million, versus $16
million in the second quarter of 2020 as the Company's
focused on conserving cash during the quarter.
- The Company ended the third quarter of 2020 with total cash of
$421 million, as compared to
$395 million in the previous quarter.
Of total cash, at the end of the third quarter, restricted cash
totaled $161 million as compared to
$139 million at the end of the second
quarter of 2020. The consolidation of IVI resulted in an increase
of $26 million of restricted cash and
$2 million of cash and cash
equivalents.
- The Company's total debt and lease liabilities ended the third
quarter of 2020 at $557 million,
including an increase in debt and lease liabilities due to the
consolidation of $203 million of 2025
Puerto Bahia debt as a result of the IVI acquisition. The bank loan
is non-recourse to Frontera (other than as provided for by the
equity contribution agreement). Net debt (ex. Unrestricted
Subsidiaries) was $113 million as of
September 30, 2020.
Gabriel de Alba, Chairman of
the Board of Directors, commented:
"Frontera continues to demonstrate operational and financial
discipline against the backdrop of a difficult oil price
environment. In the third quarter, the Company finished with higher
production volumes, stable production costs, and a cash position
virtually unchanged quarter over quarter. Purchasing a controlling
interest in Puerto Bahia provides
several benefits for Frontera: (i) it gives the Company authority
to shape the strategic direction in order to release value from the
port, and (ii) removes both the special voting provisions and a put
option held by former shareholders which created potential
uncertainty around the port. We believe the port is a unique asset,
combining a liquids terminal with a dry cargo facility, in a
strategic location. We will continue to explore means to maximize
the value of the port, and Frontera's other midstream assets. Our
focus in the fourth quarter remains on maintaining our production
volumes and our strong balance sheet, while ensuring we are
positioned for long-term growth and value creation."
Richard Herbert, Chief
Executive Officer of Frontera, commented:
"In the third quarter, we brought back online and
stabilized a portion of the production previously shut-in while
maintaining the improvements in costs and processes achieved
earlier in the year. Quarterly production was above the high end of
our second half guidance while production costs remained stable. We
achieved this while upholding our commitment to the health and
well-being of our field and office staff and people in the local
communities where we operate.
In Peru, with ongoing
disruption caused by the pandemic and the closure of the Norperuano
pipeline, we have maintained the fields in Block 192 shut-in
throughout the quarter. Frontera has notified PeruPetro of the
lifting of force majeure on July 30
and that the six-month extension of our service contract, which was
negotiated in March, will now expire in February 2021.
We are affirming our guidance for the remainder of the year,
adjusted for the recent consolidation of Puerto Bahia, as we expect stable operations and
results for the remainder of 2020. Remaining work this year will
include infrastructure investments in the Lower Magdalena Valley
and other preparatory work in Colombia, Ecuador and Guyana for our future exploration and
development projects. Our strategy is designed to give us
flexibility for the future, depending on oil prices, while
maintaining the highest capital discipline. We expect to release
our 2021 capital budget and guidance in December."
Operational and Financial Summary:
|
|
|
|
|
|
|
Q3
2020
|
Q2
2020
|
Q3
2019
|
|
|
|
|
|
Operational
Results (1)
|
|
|
|
|
|
|
|
|
|
Average
Production
|
|
|
|
|
Oil production -
Colombia
|
(bbl/d)
|
41,817
|
|
40,948
|
|
61,420
|
|
Oil production -
Peru
|
(bbl/d)
|
—
|
|
—
|
|
6,510
|
|
Natural gas
production - Colombia
|
(boe/d)
|
1,385
|
|
1,649
|
|
2,283
|
|
Total
(2)
|
(boe/d)
(3)
|
43,202
|
|
42,597
|
|
70,213
|
|
|
|
|
|
|
Sales
Volumes
|
|
|
|
|
Colombia
|
(boe/d)
|
40,445
|
|
35,963
|
|
53,802
|
|
Peru
|
(bbl/d)
|
—
|
|
—
|
|
576
|
|
Total
|
(boe/d)
|
40,445
|
|
35,963
|
|
54,378
|
|
|
|
|
|
|
Inventory
Balance
|
|
|
|
|
Colombia
|
(bbl)
|
708,103
|
|
840,893
|
|
798,953
|
|
Peru
|
(bbl)
|
1,000,058
|
|
852,892
|
|
1,851,080
|
|
Total
|
(bbl
|
1,708,161
|
|
1,693,785
|
|
2,650,033
|
|
|
|
|
|
|
Operating
Netback
|
|
|
|
|
Net sales realized
price (4)
|
($/boe)
|
36.31
|
|
34.62
|
|
53.21
|
|
Production costs
(5)
|
($/boe)
|
(8.97)
|
|
(9.03)
|
|
(11.60)
|
|
Transportation costs
(6)(7)
|
($/boe)
|
(9.89)
|
|
(11.28)
|
|
(12.00)
|
|
Operating netback
(7)(8)
|
($/boe)
|
17.45
|
|
14.31
|
|
29.61
|
|
|
|
|
|
|
Financial
Results
|
|
|
|
|
|
|
|
|
|
Oil and Gas
Sales
|
($M)
|
149,474
|
|
81,701
|
|
289,641
|
|
Net sales
(8)
|
($M)
|
135,123
|
|
113,313
|
|
266,217
|
|
Net (loss)
income(9)
|
($M)
|
(90,473)
|
|
(67,760)
|
|
(49,117)
|
|
Per share –
basic
|
($)
|
(0.93)
|
|
(0.70)
|
|
(0.50)
|
|
Per share –
diluted
|
($)
|
(0.93)
|
|
(0.70)
|
|
(0.50)
|
|
General and
administrative
|
($M)
|
10,539
|
|
9,716
|
|
18,476
|
|
Operating EBITDA
(7)(8)
|
($M)
|
52,113
|
|
37,608
|
|
124,586
|
|
Cash provided by
operating activities (10)
|
($M)
|
35,929
|
|
102,256
|
|
124,289
|
|
Capital expenditures
(11)
|
($M)
|
2,905
|
|
15,651
|
|
70,761
|
|
Total cash, including
restricted cash
|
($M)
|
421,298
|
|
394,769
|
|
442,293
|
|
Working
capital
|
($M)
|
(78,911)
|
|
37,403
|
|
124,998
|
|
Total debt and lease
liabilities
|
($M)
|
557,182
|
|
379,790
|
|
404,815
|
|
Consolidated total
indebtedness (Excluding Unrestricted Subsidiaries)
(12)
|
($M)
|
352,058
|
|
373,363
|
|
388,766
|
|
Net debt (Excluding
Unrestricted Subsidiaries) (12)
|
($M)
|
113,054
|
|
128,882
|
|
94,082
|
|
|
1. Results not
comparable to previous quarters due to IVI consolidation
|
2. Represents working
interest production before royalties and total volumes produced
from service contracts. Refer to the "Further Disclosures" section
on page 25 of the MD&A.
|
3. Boe has been
expressed using the 5.7 to 1 Colombian Mcf/bbl conversion standard
required by the Colombian Ministry of Mines &
Energy.
|
4. Per boe is
calculated using sales volumes from development and producing
("D&P") assets.
|
5. Per boe is
calculated using production.
|
6. Per boe is
calculated using net production after royalties.
|
7. For the second
quarter of 2020 the cost of the BIC Ancillary Agreements and CLC
Ancillary Agreements cancelled and unpaid were reclassified as Cost
Under Terminated Pipeline Contracts, refer to "Commitments and
Contractual Obligations" section on page 20 of the MD&A for
further details.
|
8. Refer to the
"Non-IFRS Measures" section on page 15 of the MD&A. This
section also includes a description and details for all per boe
metrics included in operating netback.
|
9. Net (loss) income
attributable to equity holders of the Company.
|
10. Figures for 2019
have been revised to reflect the change in the accounting policy of
interest paid as a financing activity instead of an operating
activity. For further information on this adjustment, refer to Note
3b of the 2019 Annual Consolidated Financial Statements.
|
11. Capital
expenditures includes costs, net of income from exploration and
evaluation ("E&E") assets.
|
12. Refer to the
"Non-IFRS Measures" section on page 15 of the MD&A.
("Unrestricted Subsidiaries") include CGX Energy
Inc.("CGX"), Pacific Midstream Ltd., and Pacinfra Holding
Ltd ("Pacinfra", including its subsidiary IVI).
|
Operational Update:
In the upstream heavy oil business unit, we reactivated CPE-6
and the Quifa satellite Cajua field during the third quarter.
Subsequently, the Sabanero block was shut-in due to ongoing issues
partially stemming from Covid-19, in the surrounding
communities.
In the light and medium district, we reactivated the Cubiro,
Casimena, and Canaguaro blocks during the quarter. Subsequently, we
performed successful workovers and stimulations on several key
wells including Ardilla-3, Yatay-2, and Candelilla-6 wells.
Capital expenditures were $3
million in the quarter as stable production allowed us to
defer some well service and workovers into the fourth quarter. In
the fourth quarter, Frontera expects to ramp up activity and
capital expenditures, including workover / well service work in key
oil fields in Colombia and to
begin construction on facilities in the Lower Magdalena Valley
("VIM"), well test in Asai and other projects in anticipation of
next year's development plans. The Company initiated work with 1
rig in the third quarter and expects to have 4 rigs running during
the quarter.
In Ecuador, Frontera continues
working to obtain environmental permits to start exploration
activities in the Perico block. The permit is expected to be
received in late 2020 and the first well is planned for drilling in
late 2021.
Operational activities in Guyana have been affected throughout most of
2020 due to the COVID-19 Pandemic. Our Joint Venture with CGX
Energy continues to have constructive collaborative discussions
with the regulatory authorities in Guyana regarding work commitments in that
country.
In our midstream business, as previously disclosed, on
August 6, 2020, Frontera closed an
agreement with the International Finance Corporation and related
funds (the "IFC") to purchase all of IFC's interests in IVI.
IVI is the parent company of Sociedad Portuaria Puerto Bahia
("Puerto Bahia"), which owns and operates a bulk liquid and dry
cargo port in Cartagena, Colombia.
The acquisition terminated a put option and special governance
rights held by the IFC. Therefore, Frontera has acquired control
over the future strategic direction of the port with a view to
unlocking material value for the Company. Frontera, through its
wholly owned subsidiary Pacinfra, now owns approximately 71.57% of
the issued and outstanding shares of IVI and as a result from the
third quarter of this year is consolidating IVI in its financial
results.
Financial Liquidity:
As of the third quarter of 2020, the Company now consolidates
IVI / Puerto Bahia, including its
$203 million of debt (non-recourse to
Frontera) and $26 million of
restricted cash.
The Company's debt as of September 30,
2020, is outlined in the table below.
($M)
|
3Q
2020
|
2Q
2020
|
Gross Debt
(1)(2)
|
$
|
557
|
$
|
380
|
(-) 2025 Puerto Bahia
Debt
|
$
|
203
|
$
|
—
|
(+) Risk Management
Assets, net (3)
|
$
|
(2)
|
$
|
(7)
|
= Consolidated
Total Indebtedness excluding 2025 Puerto Bahia Debt
(4)
|
$
|
352
|
$
|
373
|
(-) Cash and Cash
Equivalents (excluding unrestricted subsidiaries)
(5)
|
$
|
239
|
$
|
244
|
= Net Debt
excluding 2025 Puerto Bahia Debt
|
$
|
113
|
$
|
129
|
|
1. Gross debt is the
sum of Long-term debt, Borrowings (2025 Puerto Bahia Debt), and
Lease liabilities
|
2. Excludes $0.1
million of lease liabilities attributable to the Unrestricted
Subsidiaries on the third quarter
|
3. Excludes $15.0
million of risk management liabilities attributable to the
Unrestricted Subsidiaries on the third quarter
|
4. Consolidated Total
Indebtedness per Frontera 2023 indenture definition
|
5. Excludes $21.0
million of cash attributable to the Unrestricted
Subsidiaries.
|
Guidance Restatement for the Consolidation of IVI
On August 6, 2020, the Company
released updated guidance for full-year and second-half 2020. At
the time, the prevailing Brent oil price of close to $45/bbl was projected forward for the
remainder of 2020. We are reaffirming our guidance only adjusting
transportation costs for the acquisition of IVI and changes to
accounting treatment of unused ancillary contracts. To make the
guidance comparable given those changes, we have reduced
transportation cost guidance in the full year by $2.0 per boe (to $11.0 - $12.0 per
boe from $13.0 - $14.0 per boe) and in the second half by
$4.0 per boe (to $9.5 - $10.5 per
boe from $13.5 - $14.5 per boe).
|
|
Jan 1, 2020 -
Dec 31, 2020
(Full Year
Guidance)
|
Jan 1, 2020 -
Sep 30, 2020
(Actuals)
|
Jul 1, 2020 -
Dec 31, 2020
(Second Half
Guidance)
|
Jul 1, 2020 -
Sep 30, 2020
(Actuals)
|
Average Production
(1)
|
(boe/d)
|
46,000 -
48,000
|
49,765
|
40,000 -
43,000
|
43,202
|
Production
Cost
|
($/boe)
|
$9.5 -
$10.5
|
$10.48
|
$8.0 -
$9.0
|
$8.97
|
Transportation
Cost
|
($/boe)
|
$11.0 -
$12.0
|
$11.36
|
$9.5 -
$10.5
|
$9.89
|
Capital Expenditures
(2)
|
($M)
|
$100 -
$120
|
$83.2
|
$20 - $40
|
$2.9
|
|
1. Does not assume
any production from Peru for July 1, 2020 through December 31,
2020.
|
2. Guidance includes
Frontera's estimate of its share of costs of the 2020 Guyana
exploration program, as joint venture partner, but does not include
the consolidation impact of CGX share of those exploration
costs.
|
Sustainability Disclosures
During the third quarter, Frontera released its 2019
Sustainability Report along with a brand new ESG presentation,
detailing its key environmental, social, and governance ("ESG")
initiatives. The report and presentation are aligned with the
Sustainability Accounting Standard Board framework and available at
www.fronteraenergy.ca.
Hedging Update:
The goal of the hedging program is to protect the revenue
generation and cash position of the Company. The forward hedging
position was also increased in part to support restarting
production and protect the break-evens of the previously shut-in
fields. The Company has now hedged approximately 3.7 million bbls
(approximately 100% of expected production) at Brent $35/bbl for the fourth quarter of 2020 and 3.8
million bbls at Brent $35 -
$37/bbl for the first half of
2021.
The following is the current hedging portfolio as of the date of
this release:
Term
|
Type of
Instrument
|
Notional Amount
/
Volume (bbl)
|
Put/Call/Spreads
$/bbl
|
October
|
Put Spread
|
1,012,500
|
25/35
|
|
3-ways
|
269,000
|
27/37/49
|
|
Total
October
|
1,281,500
|
|
November
|
Put Spread
|
946,500
|
25/35
|
|
3-ways
|
273,000
|
27/37/49
|
|
Total
November
|
1,219,500
|
|
December
|
Put Spread
|
948,500
|
25/35
|
|
3-ways
|
251,000
|
27/37/49
|
|
Total
December
|
1,199,500
|
|
Q4
2020
|
Total
Q4
|
3,700,500
|
|
Total
2020
|
3,700,500
|
|
January
|
Put Spread
|
377,000
|
26.5/36.5
|
|
3-ways
|
296,000
|
25.5/35.5/50.4
|
|
Total
January
|
673,000
|
|
February
|
Put Spread
|
366,800
|
26.5/36.5
|
|
3-ways
|
244,000
|
25.5/35.5/50.4
|
|
Total
February
|
610,800
|
|
March
|
Put Spread
|
377,000
|
26.5/36.5
|
|
3-ways
|
300,000
|
25.5/35.5/50.4
|
|
Total
March
|
677,000
|
|
Q1
2021
|
Total
Q1
|
1,960,800
|
|
April
|
Put Spread
|
160,000
|
26.5/36.5
|
|
3-ways
|
457,000
|
25.5/35.5/51.8
|
|
Total
April
|
617,000
|
|
May
|
Put Spread
|
160,000
|
26.5/36.5
|
|
3-ways
|
481,000
|
25.5/35.5/51.8
|
|
Total
May
|
641,000
|
|
June
|
Put Spread
|
160,000
|
26.5/36.5
|
|
3-ways
|
452,000
|
25.5/35.5/51.8
|
|
Total
June
|
612,000
|
|
Q2
2021
|
Total
Q2
|
1,870,000
|
|
Total Average
2021
|
3,830,800
|
|
Third Quarter 2020 Conference Call Details
The Company will host a conference call for investors and
analysts to discuss its results on Thursday,
November 5, 2020 at 8:00 a.m.
(MST) and 10:00 a.m.
(EST/GMT-5). Participants should use the following dial-in
numbers:
Participant Number
(Toll Free North America):
|
1-888-664-6392
|
Participant Number
(Toll Free Colombia):
|
01-800-518-4036
|
Participant Number
(International):
|
1-416-764-8659
|
Conference
ID:
|
19881048
|
Webcast:
|
https://produceredition.webcasts.com/starthere.jsp?ei=1383964&tp_key=732c45bd20
|
A replay of the
conference call will be available until 11:59 p.m. (EST/GMT-5)
Thursday, November 12, 2020.
|
Encore Toll free
Dial-in Number:
|
1-888-390-0541
|
International Dial-in
Number:
|
1-416-764-8677
|
Encore ID:
|
267364
|
About Frontera:
Frontera Energy Corporation is a Canadian public company and
a leading explorer and producer of crude oil and natural gas, with
operations focused in South
America. The Company has a diversified portfolio of assets
with interests in more than 40 exploration and production blocks in
Colombia, Peru, Ecuador
and Guyana. The Company's strategy
is focused on sustainable growth in production and reserves.
Frontera is committed to conducting business safely, ethically in a
socially and environmentally responsible manner. Frontera's common
shares trade on the Toronto Stock Exchange under the ticker symbol
"FEC".
If you would like to receive News Releases via e-mail 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 statements. All
statements, other than statements of historical fact, that address
activities, events or developments that the Company believes,
expects or anticipates will or may occur in the future (including,
without limitation, statements regarding the impact of a sustained
low price of oil and natural gas, the ongoing impact of the
COVID-19 pandemic on the Company's operations, the effectiveness or
adequacy of the measures that the Company's has taken and continues
to take to manage the COVID-19 pandemic and current oil price
environment, estimates and/or assumptions in respect of the
Company's capital expenditure program (including Company's
guidance), production, costs, future income generation capacity,
cash levels, the Company's exploration and development plans and
objectives, including its drilling plans and the timing thereof,
regulatory approvals, the impact of shut-ins and other work in the
field on future field performance, and the Company's hedging
program and its ability to mitigate the impact of lower oil prices)
are forward-looking statements. These forward-looking statements
reflect the current expectations or beliefs of the Company based on
information currently available to the Company. Forward-looking
statements are 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 statements, 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. Factors that could cause actual
results or events to differ materially from current expectations
include, among other things: volatility in market prices for oil
and natural gas (including as a result of a sustained low oil price
environment due to the COVID-19 pandemic and the actions of OPEC
and non-OPEC countries and the procedures imposed by governments in
response thereto; the duration and spread of the COVID-19
pandemic and its severity, the success of the Company's program to
manage COVID-19; uncertainties associated with estimating and
establishing oil and natural gas reserves and resources;
liabilities inherent with the exploration, development,
exploitation and reclamation of oil and natural gas; uncertainty of
estimates of capital and operating costs, production estimates and
estimated economic return; increases or changes to transportation
costs; expectations regarding the Company's ability to raise
capital and to continually add reserves through acquisition and
development; the Company's ability to access additional financing;
the ability of the Company to maintain its credit ratings; the
ability of the Company to: meet its financial obligations and
minimum commitments, fund capital expenditures and comply
with covenants contained in the agreements that govern
indebtedness; political developments in the countries where the
Company operates; the uncertainties involved in interpreting
drilling results and other geological data; geological, technical,
drilling and processing problems; timing on receipt of government
approvals; fluctuations in foreign exchange or interest rates and
stock market volatility and the other risks disclosed under the
heading "Risks and Uncertainties" in the Company's MD&A dated
November 3, 2020 and under the
heading "Risk Factors" and elsewhere in the Company's annual
information form dated March 5, 2020
filed on SEDAR at www.sedar.com. Any forward-looking statement
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 statement,
whether as a result of new information, future events or results or
otherwise. Although the Company believes that the assumptions
inherent in the forward-looking statements are reasonable,
forward-looking statements are not guarantees of future performance
and accordingly undue reliance should not be put on such statements
due to the inherent uncertainty therein.
This news release contains future oriented financial
information and financial outlook information (collectively,
"FOFI") (including, without limitation, statements regarding
expected average production, production costs, transportation
costs, capital expenditures, total cash and cash and cash
equivalents), and are subject to the same assumptions, risk
factors, limitations and qualifications as set forth in the above
paragraph. The FOFI has been prepared by management to provide an
outlook of the Company's activities and results, and such
information may not be appropriate for other purposes. The Company
and management believe that the FOFI has been prepared on a
reasonable basis, reflecting management's reasonable estimates and
judgments, however, actual results of operations of the Company and
the resulting financial results may vary from the amounts set forth
herein. Any FOFI speaks only as of the date on which it is made and
the Company disclaims any intent or obligation to update any FOFI,
whether as a result of new information, future events or results or
otherwise, unless required by applicable laws.
Non-IFRS Financial Measures
This news release contains financial terms that are not
considered in the International Financial Reporting Standards
("IFRS"): Operating EBITDA, Operating Netback, Net Sales,
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. These financial measures
are included because management uses this information to analyze
operating performance and liquidity.
Operating EBITDA
Management believes that EBITDA is a common measure used to
assess profitability before the impact of different financing
methods, income taxes, depreciation and impairment of capital
assets and amortization of intangible assets.
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 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 Operating EBITDA to net loss is as
follows:
|
Three Months
Ended
|
($M)
|
September
30, 2020
|
June
30,
2020
|
September
30, 2019
|
|
|
|
|
Net (loss)
income
|
(90,473)
|
(67,760)
|
(49,117)
|
Costs under
terminated pipeline contracts(1)
|
8,391
|
8,391
|
—
|
Share-based
compensation
|
246
|
1,316
|
1,314
|
Depletion,
depreciation and amortization
|
60,960
|
58,250
|
94,019
|
Impairment
|
480
|
3,329
|
44,822
|
Restructuring,
severance and other costs
|
1,047
|
6,302
|
5,463
|
Share of income from
associates
|
(15,193)
|
(23,336)
|
(17,183)
|
Foreign exchange
loss
|
12,450
|
2,535
|
3,735
|
Finance
income
|
(2,019)
|
(6,167)
|
(5,580)
|
Finance
expenses
|
12,655
|
11,728
|
19,732
|
Unrealized loss
(gain) on risk management contracts
|
351
|
36,011
|
(4,338)
|
Other loss,
net
|
38,626
|
2,668
|
1,359
|
Income tax
expense
|
2,805
|
1,161
|
29,899
|
Non-controlling
interests
|
(2,169)
|
3,180
|
461
|
Reclassification of
currency translation adjustments
|
23,956
|
—
|
—
|
Operating
EBITDA
|
52,113
|
37,608
|
124,586
|
1. For the
second quarter of 2020 the cost of the BIC Ancillary Agreements and
CLC Ancillary Agreements cancelled and unpaid were reclassified as
Cost Under Terminated Pipeline Contracts, refer to "Commitments and
Contractual Obligations" section on MD&A.
|
|
2020
|
2019
|
($M)
|
Q3
|
Q2
|
Q1
|
Q4
|
Q3
|
Q2
|
Q1
|
|
|
|
|
|
|
|
|
Financial and
Operational results:
|
|
|
|
|
|
|
|
Operating
EBITDA
|
52,113
|
|
37,608
|
|
46,982
|
|
137,052
|
|
124,586
|
|
179,665
|
|
144,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netbacks
Management believes that Netback is a useful measure to
assess the net profit after all the 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. Operating Netback represents
realized price per barrel plus realized gain or loss on financial
derivatives, less production costs, transportation costs,
royalties, and diluent costs, and shows how efficient the Company
is at extracting and selling its product. For netback purposes, the
Company removes the effects of trading activities and Midstream
segment from its per barrel metrics. Refer to the "Operating
Netback" section on page 6 of the MD&A.
Net Sales
Net sales is 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 of diluent cost 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 exclude sales
from port services, as it is not considered part of the oil &
gas segment, and sales and purchases of oil and gas for trading as
the gross margins from these activities are not considered
significant or material to the Company's operations. 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 Unsecured Notes (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 (2025 Puerto Bahia Debt) and cash
attributable to the Unrestricted Subsidiaries.
Please see 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.
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
|
Barrel of oil per
day
|
boe
|
Refer to "Boe
Conversion" disclosure above
|
boe/d
|
Barrel of oil
equivalent per day
|
Mcf
|
Thousand cubic
feet
|
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