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Frontera Announces an Update on Block 192 in Peru

Source: www.gulfoilandgas.com 10/27/2017, Location: South America

Operational activities in the Block have been suspended since September 18, 2017 as a result of an indigenous blockade of the area. Frontera continues to work to ensure the safe evacuation of 50 workers, and safeguarding of equipment in order to avoid any potential environmental incidents caused by the communities or as a result of the uncontrolled stoppage. The Company has maintained constant communication with authorities in order to remain informed of the Block's status.

During the third quarter of 2017 the Company produced, after royalties and internal consumption, an average of 5,716 barrels of oil per day on the Block, up from 3,338 barrels of oil per day in the second quarter. Despite the current loss of production, the net financial impact to the Company is immaterial given the high cost structure of production under the existing contractual terms of the Block. Frontera has assumed the Block under the existing terms and has worked diligently with both PetroPeru, in repairing the Norperuano pipeline, and with the local communities, to help improve their social and economic wellbeing.

Under Peruvian law, the government is required to undertake a prior consultation process with indigenous groups that may be affected by national or regional projects in order to ensure appropriate consideration is given to their interest in the land. Any disagreements between an indigenous group and the terms of an agreement that was entered into as a result of the prior consultation process must be resolved directly between the Peruvian government and the affected indigenous group.

Frontera reiterates its commitment to Peru in order to ensure the long-term sustainability of the Block with its stakeholders. We emphasize our will to generate value for all parties involved in the operation of the Block, generate sources of employment, and support the long term needs of indigenous communities. To date, the Company has executed 18 cooperation agreements in matters of health, education and food with the indigenous communities in the area of influence of our operations on the Block, and have had an excellent engagement with these stakeholders to date. The Company will continue to apply the ethnic social investment framework with the aim of protecting, respecting and strengthening traditional practices and preserving cultural heritage.

"We remain optimistic that we will be able to implement our award winning social programs in Block 192 with the same expertise and care for people and the environment that we have executed on our programs in Colombia," Barry Larson, CEO, mentioned. "We are certain that the conflict between the Peruvian State and the indigenous communities in the area will come to an end on mutually beneficial terms and that we can once again work together with PetroPeru and Perupetro so that we can develop the resource in the most environmentally and socially responsible manner possible."

The Company remains committed to conducting its operations in Block 192 in a socially and environmentally conscientious manner and continuing to execute social investments in the surrounding communities.

Frontera continues to hold the Block in force majeure, which was first declared in February 2016 due to a rupture of the NorPeruano pipeline. The pipeline was partially restarted in January 2017, and operations in the Block were restored. However, force majeure will not be lifted until the pipeline is considered fully operational.

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