Frontera Energy to spend $55M on exploration in 2019
FRONTERA ENERGY Corp. has provided its full-year 2019 plan and guidance information. All values in this news release and the company’s financial disclosures are in United States dollars, unless otherwise noted.
Gabriel de Alba, chairman of the board of directors, said:
“Frontera’s 2019 plan delivers on the company’s objectives of maximizing cash generation and delivering shareholder returns by establishing a long-term production path with the optimal amount of capital, while driving company-wide efficiencies. Frontera’s strong cash position, the potential to unlock value in non-core assets and a robust balance sheet
provide the company with substantial opportunities to enhance the portfolio’s growth profile and accelerate returns to shareholders. The 2019 plan combined with the longer-term outlook for the company has given the board the confidence to announce a new dividend policy, which includes an initial dividend of $25-million and targeted quarterly dividends of $12.5-million, as well as an increased share repurchase program.”
The company’s board of directors have declared an initial dividend of 33 Canadian cents per common share. This dividend is payable on or about Jan. 17, 2019, to holders of record on Jan. 3, 2019.
(See FEC Table 1 on page 30)
The company expects to deliver a 2019 operating EBITDA (earnings before interest, taxes, depreciation and amortization) guidance which is flat with 2018 guidance, despite an 11-per-cent decrease to its Brent oil price assumption of $65/bbl in 2019 compared with $73/bbl in 2018. The company has also used a more conservative oil price differential in 2019 of $8.40/bbl, up 60 per cent compared with $5/bbl in 2018 due to pending International Marine Organization 2020 regulations. The Brent less WTI (West Texas Intermediate) spread is estimated at $3/bbl for the purposes of estimating high-priced royalties paid in kind at Quifa.
Average annual production before royalties in 2019 is expected to be in the range of 65,000 to 70,000 boe/d. This reflects improved statistical analysis of the impact of seasonality and potential social disruptions to the company’s operations. The decrease also takes into account the relinquishment of block 192 in Peru in September, 2019, which impacts the annual average by approximately 600 bbl/d or 1 per cent compared with 2018.
The 2019 plan is expected to position the company to maintain stable total company production over a three-year period, despite the risk of not executing a new contract on block 192 in Peru during 2019, as core assets in Colombia, which include Quifa, Guatiquia and Cubiro, make up for lost production.
For 2019, the company has hedged approximately 7.5 per cent of expected production before royalties with put options at a strike price of $55/bbl Brent between January and September, 2019. The company will target to hedge oil prices using put options on a go-forward basis sufficient to protect the company’s capital program, financing costs, as well as potential future dividends.
(See FEC Table 2 on page 30)
We seek Safe Harbor.
Mike Caswell condensed this news release ([email protected]watch.com).
Luis F Alarcon, William Ellis Armstrong, Raymond John Bromark, Gabriel de Alba, Russell Ford, Camilo Marulanda
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