PR Newswire
CALGARY, AB, Aug. 10, 2023
Recorded Net Income of $80.2 Million
Generated Operating EBITDA of $116.5 Million, up 27% From the Previous Quarter
Increased Average Daily Production 1% to 42,049 Boe/d,
Increased Quifa and CPE-6 Quarter Over Quarter Average Daily Production by 8.4%
Standalone and Growing Midstream Business Generated $18.2 Million of Quarterly Segment Income and $30.4 Million of Adjusted Midstream EBITDA
Entered Into Agreement To Connect Puerto Bahia and Cartagena Refinery with Up To 84,000 bbl/d Capacity Bi-Directional Hydrocarbon Flowline
Discovered 210 Feet of Hydrocarbon-Bearing Sands in the Santonian, 77 Feet of Net Light Oil and Sweet Medium Crude Pay in the Campanian and Maastrichtian at the Wei-1 Well, Offshore Guyana
Achieved 102% of 2022 ESG Goals, Invested $4.3 Million in 218 Projects Benefitting 73,100 People in Colombia, Ecuador and Peru, Offset 52% of its GHG Emissions, Achieved Best Safety Performance In Company History
CALGARY, AB, Aug. 10, 2023 /PRNewswire/ - Frontera Energy Corporation (TSX: FEC) ("Frontera" or the "Company") today reported financial and operational results for the first quarter ended June 30, 2023. All financial amounts in this news release are in United States dollars, unless otherwise stated.
Gabriel de Alba, Chairman of the Board of Directors, commented:
"Frontera continues to efficiently execute on its financial, operating, and strategic plan for its three core businesses. In the Company's Colombia and Ecuador Upstream Onshore business, production, costs, Operating EBITDA, and capex are within 2023 guidance ranges at $80/bbl average Brent prices for the year.
In its potentially transformational Guyana Exploration business, Frontera and CGX Energy, its joint-venture partner, discovered 210 feet of hydrocarbon-bearing sands in the Santonian horizon and 77 feet of net light oil and sweet medium crude pay in the Campanian and Maastrichtian horizons at the Wei-1 well, offshore Guyana.
In its standalone and growing Colombia Midstream business, the Company generated quarterly adjusted midstream EBITDA of $30.4 million, an increase of 8% over the prior quarter. Subsequent to the quarter, Puerto Bahia, entered into an agreement with Ecopetrol's subsidiary, Refinería de Cartagena S.A.S ("Reficar" or "Cartagena Refinery") to connect Frontera's Puerto Bahia liquids terminal to the Cartagena Refinery. The connection builds on the momentum from Puerto Bahia's growing liquids terminal volumes and successful refinancing earlier this year as the Company further strengthens its standalone midstream business."
Orlando Cabrales, Chief Executive Officer (CEO), Frontera, commented:
"Frontera demonstrated positive second quarter results. We increased average daily production by 1% to 42,049 boe/d for the quarter as we successfully brought-back-online production after the road blockades that occurred during the first quarter and increased water-handling capacity at Quifa and CPE-6 where production improved 8.4%. We also grew natural gas liquids production by 41% to 1,823 boe/d through increased gas reinjection at VIM-1. Subsequent to the quarter, we achieved daily record production at CPE-6 of 6,177 bbl/d.
Our total cash position including restricted cash as of the second quarter increased to $214 million while we deployed approximately $155 million in capital spending primarily to drill 19 development wells at Quifa, CPE-6 and Cubiro, improve flowlines, build a storage tank and other facilities to double water handing capacity at CPE-6, drill two exploration wells in Colombia and complete Wei-1 exploration drilling activities. We continue to proactively manage our inventories in Colombia, selling approximately 20% of total inventories under an improved differentials environment. Lastly, the Company remains vigilant on costs, with a stronger Colombian peso year-to-date affecting our domestic costs, we have hedged 40% of our Colombian-peso denominated cost-base to help protect our bottom line.
Importantly, during the quarter, we released our annual Sustainability Report, highlighting investments in 218 projects benefiting more than 73,100 people in Colombia, Ecuador, and Peru, and our success in offsetting 52% of our greenhouse gas emissions, reducing water consumption at our operations by 15% and achieving the best health and safety performance in Frontera's history."
Second Quarter 2023 Operational and Financial Summary
Q2 2023 | Q1 2023 | Q2 2022 | ||
Operational Results | ||||
Heavy crude oil production (1) | (bbl/d) | 24,051 | 22,270 | 21,455 |
Light and medium crude oil combined production (1) | (bbl/d) | 15,188 | 16,518 | 17,348 |
Total crude oil production | (bbl/d) | 39,239 | 38,788 | 38,803 |
Conventional natural gas production (1) | (mcf/d) | 5,626 | 8,590 | 10,374 |
Natural gas liquids production (1) | (boe/d) | 1,823 | 1,291 | 963 |
Total production (2) | (boe/d) (3) | 42,049 | 41,586 | 41,586 |
Inventory Balance | ||||
Colombia | (bbl) | 881,758 | 1,032,876 | 922,719 |
Peru | (bbl) | 480,200 | 480,200 | 480,200 |
Ecuador | (bbl) | 72,550 | 98,125 | 20,776 |
Total Inventory | (bbl) | 1,434,508 | 1,611,201 | 1,423,695 |
Oil and gas sales, net of purchases (4)(5) | ($/boe) | 67.91 | 69.07 | 102.80 |
Realized (loss) on risk management contracts (6) | ($/boe) | (0.80) | (1.16) | (1.15) |
Royalties (6) | ($/boe) | (3.02) | (3.36) | (10.57) |
Net sales realized price (4)(5) | ($/boe) | 64.09 | 64.55 | 91.08 |
Production costs (5)(6) | ($/boe) | (14.01) | (12.07) | (12.51) |
Transportation costs (5)(6) | ($/boe) | (11.40) | (11.20) | (10.80) |
Operating netback per boe (4) | ($/boe) | 38.68 | 41.28 | 67.77 |
Financial Results | ||||
Oil and gas sales, net of purchases (7) | ($M) | 221,218 | 189,120 | 311,253 |
Realized (loss) on risk management contracts | ($M) | (2,600) | (3,175) | (3,476) |
Royalties | ($M) | (9,837) | (9,213) | (32,018) |
Net sales (7) | ($M) | 208,781 | 176,732 | 275,759 |
Net income (loss) (8) | ($M) | 80,207 | (11.330) | 13.484 |
Per share – basic | ($) | 0.94 | (0.13) | 0.14 |
Per share – diluted | ($) | 0.92 | (0.13) | 0.14 |
General and administrative | ($M) | 12,422 | 12,669 | 15,097 |
Outstanding Common Shares | Number of | 85,188,573 | 85,188,573 | 92,676,495 |
Operating EBITDA (7) | ($M) | 116,461 | 91,922 | 190,678 |
Cash provided by operating activities | ($M) | 183,560 | 845 | 246,615 |
Capital expenditures (7) | ($M) | 154,860 | 131,452 | 93,835 |
Cash and cash equivalents – unrestricted | ($M) | 180,294 | 162,272 | 295,098 |
Restricted cash short and long-term (9) | ($M) | 33,485 | 30,877 | 57,975 |
Total cash (9) | ($M) | 213,779 | 193,149 | 353,073 |
Total debt and lease liabilities (9) | ($M) | 532,273 | 519,471 | 535,454 |
Consolidated total indebtedness (Excl. Unrestricted Subsidiaries) (10) | ($M) | 415,395 | 400,361 | 473,095 |
Net Debt (Excl. Unrestricted Subsidiaries) (10) | ($M) | 286,675 | 279,843 | 231,913 |
1. References to heavy crude oil, light and medium crude oil combined, conventional natural gas and natural gas liquids in the above table and elsewhere in this news release refer to the heavy crude oil, light crude oil and medium crude oil combined, conventional natural gas and natural gas liquids, respectively, product types as defined in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). |
2. Represents W.I. production before royalties. Refer to the "Further Disclosures" section of the Company's management's discussion and analysis for the three months ended June 30, 2023 (the "Interim MD&A"), which will be filed on the Company's profile on SEDAR+ at www.sedarplus.ca. |
3. Boe has been expressed using the 5.7 to 1 Mcf/bbl conversion standard required by the Colombian Ministry of Mines & Energy. Refer to the "Oil and Gas Information Advisories" section. |
4. Non-IFRS ratio (equivalent to a "non-GAAP ratio", as defined in National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure ("NI 52-112"). Refer to the "Non-IFRS and Other Financial Measures'' section. |
5. 2022 prior period figures are different compared with those previously reported as a result of the exclusion of Promotora Agricola de los Llanos S.A ("ProAgrollanos") revenues and, production and transportation cost. |
6. Supplementary financial measure (as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section. |
7. Non-IFRS financial measure (equivalent to a "non-GAAP financial measure", as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section. |
8. Net income (loss) attributable to equity holders of the Company. |
9. Capital management measure (as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section. |
10. "Unrestricted Subsidiaries" as of June 30, 2023, include CGX Energy Inc. ("CGX"), listed on the TSX Venture Exchange under the trading symbol "OYL", Frontera ODL Holding Corp., including its subsidiary Pipeline Investment Ltd. ("PIL"), Frontera BIC Holding Ltd., and Frontera Bahía Holding Ltd. ("Frontera Bahia"), including its subsidiary Sociedad Portuaria Puerto Bahia S.A ("Puerto Bahia"). On April 11, 2023, Frontera Energy Guyana Holding Ltd. And Frontera Energy Guyana Corp. were designated as unrestricted subsidiaries. Refer to the "Liquidity and Capital Resources" section on page 25 of the MD&A. |
Second Quarter 2023 Operational and Financial Results:
- The Company recorded net income of $80.2 million or $0.94/share in the second quarter of 2023, compared with a net loss of $11.3 million or ($0.13/share) in the prior quarter and net income of $13.5 million or $0.14/share in the second quarter of 2022. The Company's second quarter net income included operating income of $55.6 million (including $35.5 million of net of recovery of asset retirement obligations and impairment expenses), $14.3 million of share of income from associates, $17.0 million foreign exchange gain and $1.5 million in finance income, partially offset by $15.7 million in finance expenses and income tax expenses of $2.6 million.
- Production averaged 42,049 boe/d (consisting of 24,051 bbl/d of heavy crude oil, 15,188 bbl/d of light and medium crude oil, 5,626 mcf/d of conventional natural gas and 1,823 boe/d of natural gas liquids) in the second quarter of 2023, compared to 41,586 boe/d in the prior quarter and 41,586 boe/d in the second quarter of 2022. See the table above for production by product type for the prior quarter and second quarter of 2022. The increase in production quarter over quarter was mainly a result of successful development drilling in the Company's Quifa and CPE-6 blocks, and the start-up of injection facilities in the VIM-1 block partially offset by decreases in light and medium crude oil combined and conventional natural gas production due to natural declines and the return of the Neiva and Orito blocks following the completion of the blocks' production contracts, which contributed approximately 670 boe/d.
- Operating EBITDA was $116.5 million in the second quarter of 2023, up 27% compared with $91.9 million in the prior quarter and $190.7 million in the second quarter of 2022. The increase in operating EBITDA quarter-over-quarter was primarily a result of increased sales during the quarter.
- As of June 30, 2023, the Company had a total inventory balance in Colombia of 0.9 million barrels, including 0.6 million crude oil barrels and 0.3 million barrels of diluent and others. This compared to 1.0 million barrels in the prior quarter and 0.9 million barrels at June 30, 2022. The decrease in inventory balance was primarily due to inventory drawn for export sales as highlighted during our first quarter release. The Company expects these inventory draws to continue during the third quarter. Inventory balances in the second quarter related to Ecuador and Peru were 0.1 million barrels and 0.5 million barrels, respectively.
- Capital expenditures were approximately $154.9 million in the second quarter of 2023, compared with $131.5 million in the prior quarter and $93.8 million in the second quarter of 2022. Capital spending during the quarter was primarily deployed to drill 19 development wells, improve flowlines, build a storage tank and other facilities at CPE-6, drill two exploration wells and complete Wei-1 exploration drilling activities.
- Cash provided by operating activities in the second quarter of 2023 was $183.6 million, compared with $0.8 million in the prior quarter and $246.6 million in the second quarter of 2022. The increase in cash provided by operating activities quarter-over-quarter was primarily due to higher production, inventory sales, and realized foreign exchange gains, partially offset by lower Brent oil prices.
- The Company reported a total cash position of $213.8 million on June 30, 2023, compared to $193.1 million at March 31, 2023 and $353.1 million at June 30, 2022. In the second quarter, the Company invested $154.9 million in capital expenditures, including $72.8 million related to Guyana Wei-1 exploration well, and $26.7 million in debt service payments. The Company also borrowed $20.0 million under a new working capital loan facility with a maturity date of December 2023. This working capital loan is an important milestone for the Company as it marks the first time the Company has accessed traditional bank funding.
- Frontera's realized price in the second quarter was $64.09/boe, compared with $64.55/boe in the previous quarter and $91.08/boe in the second quarter of 2022. The slight variance quarter-over-quarter was driven by the decrease in the Brent oil price benchmark partially offset by better oil differentials, lower royalties, and a lower realized loss on risk management contracts.
- The Company's operating netback was $38.68/boe in the second quarter of 2023, compared with $41.28/boe in the prior quarter and $67.77/boe in the second quarter of 2022. The decrease in operating netback quarter-over-quarter was primarily due to lower realized price, foreign exchange impacts and increased production costs.
- Production costs averaged $14.01/boe, in the second quarter of 2023 compared with $12.07/boe in the prior quarter and $12.51/boe in the second quarter of 2022. The increase in production costs quarter-over-quarter was primarily a result of foreign exchange impacts, higher energy and internal transportation costs, and well services.
- Transportation costs averaged $11.40/boe in the second quarter of 2023 compared with $11.20/boe in the prior quarter and $10.80/boe in the second quarter of 2022. The increase in transportation costs quarter-over-quarter was mainly due to higher volumes transported in Colombia and increased transportation tariffs.
- Cost of purchases for the second quarter 2023 was $66.6 million including the transportation and processing fees for purchased volume sold, compared with $59.0 million in the first quarter 2023 due to additional volumes acquired partially offset by lower Brent benchmark oil prices. The sale of the purchased volumes generated an income of $59.9 million during the second quarter compared to $51.3 million in the first quarter 2023.
- During the second quarter of 2023, the Company recognized a gain of $9.0 million as a result of the early termination of some zero-cost collar foreign exchange risk management contracts. The Company subsequently re-hedged these monetized positions at updated market strike prices. Consistent with the company's hedging policies, Frontera has approximately 40% of its foreign currency risked hedged through zero- cost collars through the end of 2023 at the COP 4,300 to 4,900 range. In terms of crude oil hedges, the Company has hedged approximately 40% of its production through November 2023 at a range of $70/bbl to $80/bbl.
- The Company's Midstream business demonstrated solid performance: for ODL, total volumes pumped were 243,490 bbl/d during the second quarter of 2023, up 8% compared to the prior quarter and 16% versus the second quarter of 2022. Puerto Bahia liquid volumes were 73,714 bbl/d during the second quarter up 17% compared to the prior quarter and up 15% compared to the second quarter of 2022.
- Adjusted Midstream EBITDA in the second quarter of 2023 was $30.4 million, compared with $28.2 million in the prior quarter and $16.4 million in the second quarter of 2022. The increase quarter over quarter was driven by both higher volumes transported through ODL and higher throughput volumes in Puerto Bahia liquids port facility.
- Frontera, in a joint venture ("Joint Venture") with CGX, has successfully reached the total depth of 20,450' on the Wei-1 exploration and appraisal well. The well discovered approximately 71 feet of net oil pay in the Maastrichtian and Campanian horizons and 210 feet of hydrocarbon-bearing sands in the Santonian horizon. Independent third-party analysis is underway to determine Santonian net pay and further evaluate this interval. The Joint Venture is excited by the definitive presence of oil in the Maastrichtian and Campanian and the presence of hydrocarbons in the Santonian and believes there is significant potential in the block.
Frontera's ESG Strategy
During the quarter, the Company released its 2022 Sustainability Report, which highlighted significant achievements and set forth its ESG targets for 2023. In 2022, Frontera achieved 102% of its ESG goals - underscoring the Company's dedication to aligning its business objectives with its ESG goals and demonstrating that responsible corporate stewardship and robust business performance are mutually reinforcing.
For 2023, Frontera has set ambitious ESG targets, including (i) neutralizing 50% of its GHG (greenhouse gas) emissions through carbon credits, (ii) inaugurating its first solar farm at block CPE-6, (iii) commissioning one of its most important circular economy projects with its SAARA water treatment facility, (iv) recycling 15% of operational water used and (v) preserving an additional 1,000 hectares of biological corridors in Casanare and Meta.
Frontera's Three Core Businesses
Frontera's three core businesses include: (1) its Colombia and Ecuador Upstream Onshore business, (2) its standalone and growing Colombia Midstream business, and (3) its potentially transformational Guyana Exploration business offshore Guyana.
1. Colombia and Ecuador Upstream Onshore
During the quarter, Frontera produced 41,436 boe/d from its Colombian operations (consisting of 24,051 bbl/d of heavy crude oil, 14,575 bbl/d of light and medium crude oil combined, 5,626 mcf/d of conventional natural gas and 1,823 boe/d of natural gas liquids).
In the second quarter of 2023, the Company drilled 19 development wells at Quifa, CPE-6 and Cubiro blocks and one injector well at the CPE-6 block. This compares to 17 development wells in the prior quarter.
Currently, the Company has 2 drilling rigs and 1 workover rig active at its Quifa, CPE-6, Corcel/Guatiquia and Mapache blocks in Colombia.
Quifa Block: Quifa SW and Cajua
Production from the Quifa SW and Cajua fields averaged approximately 18,408 bbl/d of heavy crude in the second quarter of 2023 compared to approximately 16,829 bbl/d of heavy crude oil in the first quarter of 2023. The Company drilled 12 production wells (seven wells at Quifa and five wells at Cajua) on the blocks in the second quarter of 2023.
The Company's current water handling capacity is approximately 1.6 million bwpd in Quifa. Increasing water handling capacity is key to Frontera's efforts to grow production at Quifa. In 2023, Frontera began recommissioning SAARA (previously known as Agrocascada), its reverse osmosis water treatment facility with an estimated 1 million bwpd nameplate capacity. As of July 2023, the plant had processed 7.6 million barrels of water as part of its recommissioning program (a five-fold increase in treatment compared to April 2023), providing irrigation source water to the Company's nearby ProAgrollanos palm oil plantation.
CPE-6
At CPE-6, production averaged approximately 5,116 bbl/d of heavy crude oil in the second quarter 2023 compared with approximately 4,850 bbl/d in the first quarter of 2022. During the quarter, the Company drilled five development wells and one injector well. Subsequent to the quarter, the Company achieved record daily production at CPE-6 of 6,177 bbl/d. During the quarter, Frontera invested in the expansion and improvement of the development facilities in the CPE-6 block, which will double water-handling capacity to 240,000 bbls/day by the end of 2023 and support additional growth for the field.
Other Colombia Developments
At Guatiquia, production averaged approximately 7,228 bbl/d of light and medium crude oil in the second quarter of 2023 compared with approximately 7,317 bbl/d in the first quarter of 2022.
During the quarter, Cubiro production averaged approximately 1,915 bbl/d of light and medium crude oil in the second quarter of 2023 compared with approximately 2,180 bbl/d in the first quarter of 2022. The Company drilled two development wells.
At VIM-1 (Frontera 50% W.I., non-operator), production averaged 1,171 bbl/d of light and medium crude oil in the second quarter of 2023 compared to approximately 1,711 bbl/d of light and medium crude oil in the first quarter of 2023.
Colombia Exploration Assets
The Company's exploration focus remains on the Lower Magdalena Valley and Llanos Basins in Colombia.
At the Llanos-99 block, the Company completed the acquisition of 163 square kilometers of 3D seismic and is currently completing administrative closure of the project. The Company continues to progress pre-seismic and pre-drilling activities related to social and environmental studies in the Llanos-119, Llanos-99, CPE-6 and VIM-46 blocks.
Ecuador
Frontera's share of production in Ecuador for the three months ended June 30, 2023, was 613 bbl/d of medium crude oil compared to 1,005 bbl/d in the prior quarter.
At the Jandaya-1, Tui-1 and Yin-1 exploration wells, in the Perico block (Frontera 50% W.I. and operator), the Company continues to conduct long-term testing and is preparing environmental impact assessments in order to obtain a production environmental license. Currently, the Company has drilled three out of four wells required as part of its work commitment on the Perico block. The Yin-2 appraisal well was drilled in July, discovering 48 feet of net pay in the Lower U sand and 24 feet net pay in the Hollin main formation. The well has been successfully completed with initial production rates of approximately 1,200 bbl/d of 30.5 degree API crude oil. Pre-drilling activities and civil works are underway in advance of drilling the Jandiayacu (former Yin Sur-1) exploratory well, which the Company expects to spud in mid-late August.
At the Espejo block (Frontera 50% W.I. and non-operator), preliminary logging information indicated the presence of hydrocarbons in both the Pashuri-1 and Caracara-1 exploration wells and further analysis is underway. In addition, jointly with the operator, new 3D seismic survey data is being interpreted to define the location of the two remaining commitment exploration wells.
2. Midstream Colombia
Frontera has investments in certain infrastructure and midstream assets, including storage, port and other facilities in Colombia and the Company's investments in pipelines ("Midstream Colombia Segment"). The Midstream Colombia Segment principally includes a 35% equity interest in the Oleoducto de los Llanos Orientales S.A. ("ODL") pipeline through Frontera's wholly owned subsidiary PIL, and the Company's 99.80% interest in Puerto Bahia.
Puerto Bahia and Reficar Connection
Frontera's majority owned subsidiary Puerto Bahía and Refinería de Cartagena S.A.S. have entered into an agreement (the "Connection Agreement") to connect Puerto Bahia's port facility and the Cartagena Refinery via a 6.8-kilometre, 18-inch bi-directional hydrocarbon flowline allowing for the transportation of crude oil and other hydrocarbons between Puerto Bahía's port facility and the Cartagena Refinery.
The connection will be built, operated, and maintained by Puerto Bahia and will have a capacity of up to 84,000 barrels per day. The connection will be capable of handling imported and domestically produced crudes. Construction of the connection is expected to begin in 2H'23 and take approximately 12-18 months to complete at an anticipated total cost of approximately $30 million.
Midstream Colombia Segment Results
The Company's Midstream Colombia Segment income increased by $5.5 million for the three months ended June 30, 2023, compared with the same period of 2022. For the three months ended June 30, 2023, the Puerto Bahia liquids terminal revenues increased by $1.3 million compared with the same period of 2022. The liquids terminal revenues during the second quarter of 2023, represent 70% of total revenues. General cargo terminal revenues decreased by 10%, compared with the same period in 2022, due to lower volumes of roll-on/roll-off ("RORO") units.
For the three and six months ended June 30, 2023, ODL generated $69.9 million and $135.3 million of EBITDA, respectively, and $41.0 million and $79.8 million of net income, respectively. ODL total volumes pumped were 243,490 bbl/d during the second quarter of 2023, up 16% versus the second quarter of 2022. The ODL results are recorded through the equity method in the Company's Interim Financial Statements as "Share of income from associates".
Three months ended June 30 | Six months ended June 30 | |||
($M) | 2023 | 2022 | 2023 | 2022 |
Revenue | 13,080 | 12,239 | 24,226 | 22,571 |
FEC liquids port facility | 1,903 | 1,936 | 3,567 | 3,388 |
Third party liquids port facility | 7,254 | 5,947 | 13,086 | 11,305 |
General Cargo | 3,923 | 4,356 | 7,573 | 7,878 |
Cost | (5,733) | (5,612) | (10,850) | (10,291) |
General administrative expenses | (1,455) | (1,082) | (2,797) | (2,753) |
Depletion, depreciation, and amortization | (1,319) | (1,563) | (2,551) | (3,039) |
Restructuring, severance, and other costs | (700) | (882) | (803) | (1,056) |
Puerto Bahia Income from operations | 3,873 | 3,100 | 7,255 | 5,432 |
Share of income from associates - ODL | 14,345 | 9,648 | 27,917 | 18,742 |
Segment income | 18,218 | 12,748 | 35,142 | 24,174 |
Segment cash flow from operations activities | 20,101 | 14,980 | 27,709 | 32,004 |
Three months ended June 30 | Six months ended June 30 | |||
($M) | 2023 | 2022 | 2023 | 2022 |
Adjusted Midstream Revenue (1) | 43,186 | 25,604 | 81,417 | 48,606 |
Adjusted Midstream Operating Cost (1) | (9,307) | (7,367) | (9,307) | (13,663) |
Adjusted Midstream General and administrative (1) | (2,803) | (1,885) | (5,117) | (4,197) |
Adjusted Midstream EBITDA | 30,361 | 16,352 | 57,951 | 30,071 |
1. Non-IFRS financial measure (equivalent to a "non-GAAP financial measure", as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section. |
The Adjusted Midstream EBITDA for the three months ended June 30, 2023, increased by $14.0 million compared with the same period of 2022, as a result of the higher pipeline volumes transported, and higher throughput volumes at the liquids port facility.
3. Guyana Exploration
During the quarter, Frontera and its Joint Venture partner CGX, announced a significant oil discovery at the Wei-1 well, located on the Corentyne block, approximately 200 kilometers offshore from Georgetown, Guyana. The Joint Venture discovered 210 feet of hydrocarbon-bearing sands in the Santonian horizon confirmed by wireline logs and extensive core samples. The rock and fluid properties of the Santonian are currently being analyzed by an independent third-party laboratory to define net pay and a basis for the evaluation of this interval. This discovery follows the Company's previous Kawa-1 discovery in 2022.
Following the safe and successful completion of Wei-1 well drilling operations, Frontera and CGX have entered into an agreement (the "JOA Amending Agreement") to amend the Joint Operating Agreement originally signed between a subsidiary of Frontera and CGX on January 30, 2019 (as amended from time to time) effectively farming into the Corentyne block to cover the unexpected additional costs of the Wei-1 well due to delays associated with the late release of the rig by a third-party, costs associated with a lost sampling tool, and the drilling of the bypass well. The transactions contemplated by the JOA Amending Agreement remain subject to regulatory approvals, including approval of the TSX Venture Exchange.
As part of the JOA Amending Agreement, CGX will transfer 4.7% of its participating interest in the Corentyne block to Frontera in exchange for Frontera funding CGX's additional expected outstanding share of the Joint Venture's costs associated with the Wei-1 well (the "CGX Corentyne Block Expenses") for up to $16.5 million. As a result of the JOA Amending Agreement, if the full 4.7% participating interest is transferred by CGX and not re-assigned, the Company will have a 72.7% participating interest and CGX will have a 27.3% participating interest in the Corentyne block.
Hedging Update
As part of its risk management strategy, Frontera uses derivative commodity instruments to manage exposure to price volatility by hedging a portion of its oil production. Consistent with this strategy, the Company entered new put hedges totaling 2,096,000 bbls to protect a portion of the Company's production through November 2023. The following table summarizes Frontera's 2023 hedging position as of August 9, 2023.
Term | Type of Instrument | Open (bbl/d) | Average Put/ Call |
July | Put | 13,548 | 70 |
