Fron­tera En­ergy to spend $55M on ex­plo­ration in 2019

Stockwatch Daily - - ENERGY - Mr. Gabriel de Alba re­ports

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

(FEC) Shares: 99,696,152

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