Frontera Announces Expected Second Quarter Production Results

Source: www.gulfoilandgas.com 7/16/2021, Location: North America

Frontera Energy Corporation announced its expected second quarter production results and updated its production guidance for 2021. All values in this news release are in United States dollars, unless otherwise noted.

Second Quarter and First Half 2021 Production Update
Frontera expects its second quarter 2021 production will average approximately 35,700 boe/d, compared to 40,599 boe/d in the first quarter of 2021. The Company expects to average approximately 38,100 boe/d for the first half of 2021. The following table provides a breakdown by product type. The Company has averaged approximately 36,000 boe/d so far in July.

The decrease in the Company's expected second quarter production is due to several factors including:
- the reduction of water disposal volumes at its Quifa block (previously announced on May 5, 2021) which resulted in decreased production of approximately 3,500 boe/d during the second quarter compared to the first quarter of 2021;
- slower than anticipated recovery of full production levels at CPE-6 following the lifting of road blockades, subsequent community unrest at CPE-6, and the inability to access the Company's Sabanero field; and community-related delays impacting operational activities at Coralillo.
- At Quifa, reserves have been unaffected by the temporary reduction in water disposal volumes. The Company is developing other water disposal options for the benefit of long-term production, including drilling a new injector well on the block which had been delayed due to concerns from the community. The Company has been in conversations with the community for weeks to address their concerns. Such conversations were concluded today and the Company expects that once the new injector well is drilled and operational, Quifa production will increase.

In the second half of 2021, Frontera expects to drill 10 development wells at Quifa, reactivate production at Jaspe block, and increase production at CPE-6 by approximately 40% (compared to 2020) through continued drilling and construction of additional water-handling facilities. The Company notes that production at CPE-6 has returned to pre shut-in levels of approximately 3,600 boe/d.

Orlando Cabrales, Chief Executive Officer (CEO), Frontera, commented:
"Frontera's Q1 production averaged a strong 40,599 boe/d. However, Frontera's expected Q2 production of 35,700 boe/d is lower than planned due to temporarily reduced water disposal volumes and community concerns which delayed drilling a new injector well at Quifa. Localized community-related delays, separate from the national strikes, also impacted some of our operations during the second quarter.

We are revising our capital and production guidance. The Company now expects average daily production of 37,500-39,500 boe/d for the year and anticipates a year end exit rate of over 40,000 boe/d. Currently we have four drilling rigs and four workover rigs active across our operations. Importantly, our reserves remain unaffected and will continue to be produced in the current higher oil price environment. Frontera expects to deliver EBITDA of $325-$375 million this year, above the previous guidance announced by the Company. Frontera's stable 2P reserve base and diverse assets will allow us to continue to optimize capital efficiency and free cash flow after development capex in the second half of 2021 and beyond."

Updated Guidance Metrics
- The Company expects average daily production of 37,500-39,500 boe/d for the year compared to 40,500-42,500 boe/d as announced on March 3, 2021.
- Operating costs are expected to remain unchanged for 2021 but production costs are expected to increase by approximately $0.50/boe to $10.50-$11.50/boe; while transportation costs are expected to decrease by approximately $0.50/boe to $10.00-$11.00/boe.
- The Company has narrowed its exploration capex range to $115-$130 million reflecting the expected costs of the Kawa-1 exploration well offshore Guyana as it continues to consider strategic options.
- The Company has also narrowed its total capital expenditure range to $245-$295 million.
- Operating EBITDA is expected to increase from $275-$325 million to $325-$375 million for the year.


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