PR Newswire
TORONTO, March 28, 2018
Value Over Volumes Focus in 2017 Generates Net Cash Provided by Operating Activities of $356 Million and Operating EBITDA Over $390 Million
TORONTO, March 28, 2018 /PRNewswire/ - Frontera Energy Corporation (TSX: FEC) ("Frontera" or the "Company") announced today the release of its: consolidated financial statements for the year and quarter ended December 31, 2017, management discussion and analysis ("MD&A"), Annual Information Form ("AIF") and Form 51-101 F1 - Statement of Reserves Data and Other Oil and Gas Information for the Company (the "F1 Report") in respect of the year ended December 31, 2017. These documents, among others, will be posted on the Company's website at www.fronteraenergy.ca and SEDAR at www.sedar.com. All values in this news release and the Company's financial disclosures are in United States dollars unless otherwise stated.
Frontera delivered exceptional financial and operating results in the fourth quarter to close the year with strong performance. The Company met or exceeded its 2017 guidance targets, with exit rate production of 71,015 boe/d (within guidance range of 70,000 boe/d to 75,000 boe/d), operating EBITDA of $390 million (above upwardly revised operating EBITDA guidance range of $300 to $350 million, up from second quarter 2017 operating EBITDA guidance range of $275 to $300 million) and capital expenditures of $236 million (below downwardly revised guidance range of $250 to $300 million). Cash and cash equivalents, including restricted cash, stood at $644 million on December 31, 2017; net cash provided by operating activities was $356 million, $120 million higher than capital expenditures, a 28% year-over-year increase. The Company also reduced general and administrative costs in 2017 by 27% to $105 million.
Gabriel de Alba, Chairman of the Board of Directors, commented:
"The Board is very excited about the Company's direction in 2018 as it looks to continue creating value for our shareholders. In 2017, management delivered on its defined strategy of sustainable growth in production, reserves and cash generation. Furthermore, the Company continued to streamline its operations, dispose of non-core assets and further strengthened the balance sheet, which in turn has unlocked additional value for our shareholders. We commend the hard work and dedication of our employees who are the backbone of the Company and are the reason the Company was able to attain our 2017 goals."
Barry Larson, Chief Executive Officer of the Company, commented:
"The comprehensive technical review of our assets and the strategy of focusing on value over volumes delivered impressive results this past year. In 2017, the Company achieved key operational objectives including higher initial oil rates in our Quifa SW field, the implementation of a pressure maintenance project and the discovery of new exploration and development opportunities on our existing acreage. Despite a 10% reduction in overall 2P reserve volumes, Frontera increased the before tax NPV10 value of our 2P reserves by 9% despite using forward oil price assumptions that were 4% lower than those used in 2016. As we look forward to 2018, we are positioning the Company for growth in production and reserves in the short, medium and long term."
FULL YEAR AND FOURTH QUARTER 2017 HIGHLIGHTS
Delivering stable 2017 production:
Driving value from existing asset portfolio:
Generating sustained financial results in 2017:
Strong cash position and positive credit profile:
Realizing value from non-core assets and streamlining operations:
Frontera stock split:
Production:
Net Production Summary(1) |
|||||||||
2017 |
2016 | ||||||||
Q4 |
Q3 |
Q2 |
Q1 |
Full Year |
Q4 |
Full Year | |||
Oil and liquids (bbl/d) |
|||||||||
Colombia |
56,593 |
58,836 |
61,535 |
62,180 |
59,767 |
60,150 |
67,802 | ||
Peru |
2,538 |
6,805 |
4,913 |
3,855 |
4,531 |
2,079 |
3,106 | ||
Total oil and liquids (bbl/d) |
59,131 |
65,641 |
66,448 |
66,035 |
64,298 |
62,229 |
70,908 | ||
Natural gas (boe/d)(2) |
|||||||||
Colombia |
5,314 |
5,427 |
5,922 |
6,489 |
5,784 |
7,203 |
8,763 | ||
Total natural gas (boe/d) |
5,314 |
5,427 |
5,922 |
6,489 |
5,784 |
7,203 |
8,763 | ||
Total equivalent production (boe/d)(3) |
64,445 |
71,068 |
72,370 |
72,524 |
70,082 |
69,432 |
79,671 |
1 Additional production details are available in the MD&A. | |
2 Colombian standard natural gas conversion ratio of 5.7 Mcf per bbl as required by the Colombian Ministry of Mines and Energy. | |
3 2016 Full Year results exclude 23,861 bbl/d of production from the Rubiales-Piriri contracts. |
Financial Results:
2017 |
2016 | |||
Q4 |
Full Year |
Q4 |
Full Year | |
Total Sales ($ millions) |
335 |
1,259 |
270 |
1,412 |
Net (loss) income(2) |
(33) |
(217) |
4,025 |
2,449 |
Per share - basic ($)(3) |
(0.65) |
(4.33) |
80.50 |
48.97 |
Net cash provided (used) by operating activities |
166,750 |
356,037 |
(63,227) |
(119,677) |
Operating EBITDA ($ millions)(1) |
105 |
390 |
44 |
445 |
Operating EBITDA margin (Operating EBITDA/total sales)(1) |
31% |
31% |
16% |
31% |
Adjusted EBITDA ($ millions)(1) |
2 |
249 |
(2) |
254 |
Adjusted EBITDA margin (Adjusted EBITDA/total sales)(1) |
1% |
20% |
(1)% |
18% |
Adjusted FFO ($ millions)(1) |
95 |
267 |
8 |
257 |
Net production after royalties (boe/d)(4) |
64,445 |
70,082 |
69,432 |
79,671 |
Sales volumes (boe/d) |
65,481 |
65,980 |
67,470 |
94,716 |
Average shares outstanding - basic (thousands) |
50,005 |
50,005 |
50,002 |
50,002 |
1 These metrics are Non-IFRS financial measures. See Advisories - "Non-IFRS Financial Measures" - below and "Non-IFRS Measures" on page 20 of the | |
2 Net (loss) income attributable to equity holders of the Company. | |
3 Both basic and diluted weighted average numbers of common shares for the year ended December 31, 2017 were 50,005,832 (December 31, 2016: 50,002,363 | |
4 2016 Full Year results exclude 23,861 bbl/d of production from the Rubiales-Piriri contracts. |
2017 Reserves:
For the year ended December 31, 2017, the Company received independent certified reserves evaluation reports for its producing assets with total net 2P reserves of 154 MMboe. Compared with 171 MMboe certified for the year ended December 31, 2016, the year-over-year decline is mainly due to negative technical revisions associated with well performance and legacy issues related to the La Creciente and Orito blocks. 1P reserves of 114 MMboe now represent 74% of the total 2P reserves compared with 69% of the total 2P reserves in 2016.
The following tables summarize information contained in the independent-reserves reports prepared by RPS Energy Canada Ltd. ("RPS") and DeGolyer and MacNaughton ("D&M") effective December 31, 2017.
These reserves reports were prepared in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook and the National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and included in the F1 Report filed on SEDAR. Additional reserves information as required under NI 51-101 can also be found on SEDAR under the: (i) Forms 51-101F2 - Report on Reserves Data by Independent Qualified Reserves Evaluator completed by each of D&M dated February 26, 2018 and RPS dated March 5, 2018; and (ii) Form 51-101F3 - Report of Management and Directors on Oil and Gas Disclosure dated March 27, 2018.
All reserves presented are based on forecast pricing and estimated costs effective December 31, 2017 as determined by the Company's independent reserves evaluators. The Company's net reserves after royalties incorporate all applicable royalties under Colombia and Peru fiscal legislation based on forecast pricing and production rates, including any additional participation interest related to the price of oil applicable to certain Colombian blocks, as at year-end 2017.
Reserves at December 31, 2017 (MMboe)(1)(6) | ||||||||
Country |
Field |
Total Proved |
Probable (P2) |
Proved Plus |
Hydrocarbon Type | |||
Gross |
Net |
Gross |
Net |
Gross |
Net | |||
Colombia |
Quifa SW |
49 |
43 |
2 |
2 |
51 |
44 |
Heavy oil |
Other heavy oil blocks(2) |
35 |
30 |
15 |
13 |
50 |
44 |
Heavy oil | |
Light/medium oil blocks(3) |
38 |
35 |
21 |
19 |
59 |
54 |
Light and medium oil and | |
Natural gas blocks(4) |
2 |
2 |
1 |
1 |
3 |
3 |
Natural gas | |
Sub-total |
124 |
110 |
39 |
35 |
163 |
145 |
Oil and natural gas | |
Peru |
Light/Medium oil and |
5 |
4 |
5 |
5 |
10 |
9 |
Oil and natural gas |
Total at Dec. 31, 2017 |
129 |
114 |
44 |
40 |
173 |
154 |
Oil and natural gas | |
Total at Dec. 31, 2016 |
132 |
117 |
59 |
53 |
190 |
171 |
||
Difference |
(3) |
(3) |
(15) |
(13) |
(18) |
(17) |
||
2017 Production |
27 |
26 |
Total Reserves |
10 |
9 |
1 See "Boe Conversion" section in the Advisories, at the end of this press release. | |
2 Includes Cajua, Jaspe, Quifa North, Sabanero, and CPE-6 blocks. | |
3 Includes Cubiro, Cravo Viejo, Canaguaro, Guatiquia, Casimena, Corcel, Neiva, Cachicamo, and other producing blocks. | |
4 Includes La Creciente Field and Guaduas block. | |
5 Includes onshore block 192 and offshore block Z1. | |
6 Gross refers to WI before royalties, Net refers to WI after royalties; numbers in table may not add due to rounding differences. |
2017 2P Reserves Reconciliation | ||
Oil Equivalent |
Oil Equivalent | |
December 31, 2016 |
190 |
171 |
Net Additions |
22 |
27 |
Economic and Technical Revisions |
(12) |
(18) |
Production(1) |
(27) |
(26) |
December 31, 2017 |
173 |
154 |
1Production represents the production for the twelve month period ended December 31, 2017. | |
Note: Numbers in the table may not add due to rounding differences. |
Fourth Quarter and Year End 2017 Conference Call Details:
As previously disclosed, a conference call and webcast for investors and analysts will be held on Wednesday, March 28, 2018 at 8:30 a.m. (Calgary time), 9:30 a.m. (Bogotá time) and 10:30 a.m. (Toronto time). Participants will include Gabriel de Alba, Chairman of the Board of Directors, Barry Larson, Chief Executive Officer and select members of the senior management team.
A presentation will be available on the Company's website prior to the call, which can be accessed at www.fronteraenergy.ca.
Analysts and investors are invited to participate using the following dial-in numbers:
Participant Number (International/Local): |
(647) 427-7450 |
Participant Number (Toll free Colombia): |
01-800-518-0661 |
Participant Number (Toll free North America): |
(888) 231-8191 |
Conference ID: |
8081957 |
Webcast: www.fronteraenergy.ca |
A replay of the conference call will be available until 10:59 p.m. (Bogotá time) and 11:59 p.m. (Toronto time) Wednesday, April 11, 2018 and can be accessed using the following dial-in numbers:
Encore Toll Free Dial-in Number: |
1-855-859-2056 |
Local Dial-in Number: |
(416)-849-0833 |
Encore ID: |
8081957 |
About Frontera:
Frontera is a Canadian public company and a leading explorer and producer of crude oil and natural gas, with operations focused in Latin America. The Company has a diversified portfolio of assets with interests in more than 38 exploration and production blocks in Colombia and Peru. The Company's strategy is focused on sustainable growth in production and reserves and cash generation. Frontera is committed to conducting business safely, in a socially and environmentally responsible manner.
The Company'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 estimates and/or assumptions in respect of production, revenue, cash flow and costs, reserve and resource estimates, potential resources and reserves and the Company's exploration and development plans and objectives) 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: uncertainty of estimates of capital and operating costs, production estimates and estimated economic return; uncertainties associated with estimating oil and natural gas reserves; failure to establish estimated resources or reserves; volatility in market prices for oil and natural gas; fluctuation in currency exchange rates; inflation; changes in equity markets; perceptions of the Company's prospects and the prospects of the oil and gas industry in Colombia and the other countries where the Company operates or has investments; uncertainties relating to the availability and costs of financing needed in the future; the uncertainties involved in interpreting drilling results and other geological data; and the other risks disclosed under the heading "Risk Factors" and elsewhere in the Company's annual information form dated March 27, 2018 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.
In addition, 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.
Non-IFRS Financial Measures
This news release contains financial terms that are not considered in the International Financial Reporting Standards ("IFRS"): Operating and Adjusted EBITDA, Operating Netback, and Adjusted FFO. These non-IFRS measures do not have any standardized meaning, and therefore are unlikely to be comparable to similar measures presented by other companies. These non-IFRS measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These financial measures are included because management uses this information to analyze operating performance and liquidity.
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.
A reconciliation of Operating and Adjusted EBITDA to net (loss) income is as follows:
Three Months Ended December 31 |
Year Ended December 31 | |||
(in thousands of US$) |
2017 |
2016 |
2017 |
2016 |
Net (loss) income(1) |
(32,544) |
4,025,194 |
(216,703) |
2,448,523 |
Adjustments |
||||
Income tax expense (recovery) |
(10,438) |
(2,778) |
15,265 |
36,175 |
Depletion, depreciation and amortization |
95,062 |
85,700 |
382,246 |
575,985 |
Impairment and exploration expenses |
36,468 |
(636,594) |
123,180 |
477,005 |
Finance costs |
5,478 |
66,497 |
24,168 |
191,245 |
Net gain on restructuring |
— |
(3,620,481) |
— |
(3,620,481) |
Restructuring and severance costs |
2,436 |
55,034 |
12,617 |
154,855 |
Reversal of provision related to high-price clause |
(99,622) |
— |
(99,622) |
— |
Equity tax |
— |
— |
11,694 |
26,901 |
Other expense (income) |
4,786 |
15,661 |
5,425 |
(25,967) |
Foreign exchange unrealized loss (gain) |
373 |
9,800 |
(9,621) |
(10,622) |
Adjusted EBITDA |
1,999 |
(1,967) |
248,649 |
253,619 |
Gain on valuation of unrealized hedge contracts |
80,774 |
13,471 |
71,762 |
139,457 |
Share of income from associates, net of impairment |
(14,809) |
4,253 |
(76,186) |
(62,840) |
Gain attributable to non-controlling interest |
7,172 |
5,085 |
26,788 |
15,288 |
Share based compensation (gain) loss |
2,119 |
728 |
2,605 |
(7,775) |
Foreign exchange realized loss |
3,099 |
4,057 |
7,745 |
1,759 |
Fees paid on suspended pipeline capacity |
24,656 |
18,648 |
108,831 |
105,129 |
Operating EBITDA |
105,010 |
44,275 |
390,194 |
444,637 |
1Net income (loss) attributable to equity holders of the Company. |
2017 |
2016 | |||||||
(in thousands of US$ ) |
Q4 |
Q3 |
Q2 |
Q1 |
Q4 |
Q3 |
Q2 |
Q1 |
Financial and Operational results: |
||||||||
Operating EBITDA |
105,010 |
105,885 |
86,857 |
92,442 |
44,275 |
89,846 |
120,452 |
190,064 |
Adjusted EBITDA |
1,999 |
44,203 |
87,389 |
115,058 |
(1,967) |
37,689 |
126,083 |
91,814 |
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.
The third quarter of 2017 marked the first time the Company disclosed Adjusted FFO, providing stakeholders with greater insight given the increasing significance of these metrics to evaluate operational results.
Adjusted Funds Flow from Operations
Adjusted FFO is a non-IFRS financial measure that adjusts an IFRS measure - cash flow provided by (used) in operating activities - for changes in non-cash working capital, which management uses to analyze operating performance and liquidity. Changes to non-cash working capital can include differences in timing of cash flows related to accounts receivable and accounts payable, which management believes reduces comparability among periods. The indicator excludes assets retirement obligation settlements, one-time expenses for the Company not related to ongoing operations such as restructuring and severance costs, and loss (gain) from past assets.
Three Months Ended December 31 |
Year Ended December 31 | |||||||
(in thousands of US$) |
2017 |
2016 |
2017 |
2016 | ||||
Net cash provided (used) by operating activities |
166,750 |
(63,227) |
356,037 |
(119,677) | ||||
Changes in non-cash working capital |
25,458 |
16,310 |
(2,415) |
144,347 | ||||
Deferred revenue net proceeds |
— |
— |
— |
75,000 | ||||
Restructuring and severance costs |
2,436 |
55,034 |
12,617 |
154,855 | ||||
Settlement of asset retirement obligations |
367 |
139 |
2,214 |
2,447 | ||||
Loss (gain) from past assets and provisions |
(100,316) |
— |
(100,958) |
— | ||||
Adjusted FFO |
94,695 |
8,256 |
267,495 |
256,972 |
Please see the Company's most recent Management's Discussion and Analysis, which is available at www.sedar.com for additional information about these financial measures.
Boe Conversion
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. For properties in Peru, the Company has expressed boe using the Peruvian conversion standard of 5.626 Mcf: 1 bbl required by Perupetro S.A., Peru's state regulatory agency.
Definitions:
1P |
Proved reserves. |
2P |
Proved plus probable reserves. |
Bcf |
Billion cubic feet. |
Bcfe |
Billion cubic feet of natural gas equivalent. |
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. |
Mbbl |
Thousand barrels. |
Mboe |
Thousand barrels of oil equivalent. |
MMbbl |
Million barrels. |
MMboe |
Million barrels of oil equivalent. |
Mcf |
Thousand cubic feet. |
Net |
Net production after royalties represents the Company's working interest volumes, net of |
NPV10 |
Net present value discounted at 10%. |
SOURCE Frontera Energy Corporation