Frontera Energy analyzes the divestment of some of its assets in Colombia

Frontera Energy analyzes the divestment of some of its assets in Colombia
Frontera Energy analyzes the divestment of some of its assets in Colombia

Frontera Energy has announced the possibility of divesting certain segments of its business as part of a new strategy to optimize your asset portfolio and focus on your highest profitable areas. This information was announced in the presentation of first quarter results.

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Gabriel de Alba, president of the Board of Directorsexplained that the company is evaluating strategic options for its growing infrastructure business in Colombia, which could include a spin-off, a full or partial sale, or even a business combination.

Specifically, Alba made reference to “with the support from Goldman Sachswe have launched a process of strategic alternatives for your independent and growing Colombian infrastructure businesswhich may include a spin-off, full or partial sale, or other business combination“.

During the first quarter of 2024, Frontera generated a Operating EBITDA of US$97.2 million and ended the quarter with a total cash balance of US$182 million. Despite the challenges faced, such as the temporary lockdown of communities and delays in strategic water disposal initiatives, the company reported that it managed to maintain significant average daily production and has continued to invest in its core assets.

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However, Frontera’s management believes that exploring strategic options for some of its businesses could unlock significant value for its shareholders.


Orlando Cabrales, president of Frontera Energy

Courtesy

One of the assets that Frontera could consider divesting its oil transportation and handling infrastructure in Colombia, which includes the Llanos Orientales Pipeline (ODL) and Puerto Bahía.

In the first trimester, ODL declared a dividend of US$157 million, reflecting its strong cash generation capacity. Puerto Bahía, although it showed a slight decrease in the income of liquids handled, remains a valuable asset that could attract the interest of potential buyers or strategic partners.

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Orlando Cabrales, CEO of Frontera, emphasized that cAny divestment decision will be made with the objective of strengthening the company’s financial position and allowing for a more concentrated approach. in its main operations in Colombia and Ecuador.

Border will continue to evaluate its business and may consider future shareholder initiatives in 2024 and beyond, including the possibility of additional dividends, distributions or buybacks of bonds, depending on the general results of their operations and strategic goals, as reported to the market.

During the first quarter of 2024, the oil company recorded a net loss of US$8.5 million, equivalent to US$0.10 per sharein contrast to net income of US$92.0 million or US$1.08 per share in the previous quarter.

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This loss is mainly attributed to high tax expenseswhich totaled US$$26.6 million, driven by a 50% income tax that includes a 15% surcharge associated with the 2022 Colombian tax reform. It is worth noting that during this reform it was determined that a surcharge associated with the best prices for a barrel of crude oil would be applied to the 35% income tax, which for 2023 was 15%.


Petroleum

iStock


Additionally, The company faced financial expenses of US$17.3 million and losses related to risk management contracts for US$$8.8 million.

In operational terms, Frontera generated a Operating EBITDA of US$97.2 million in the first quarter of 2024, a decrease from US$121 million in the previous quarter and slightly higher than the US$91.9 million of the same period of the previous year.

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The rThe reduction in Ebitda is mainly due to lower sales volumes and higher production and energy costs. Despite these challenges, the company maintains a strong financial position with a total cash balance of US$182 million at the end of the quarter, after investing US$69.4 million in capital expenditures.

The Frontera’s total revenues were impacted by an average production of 38,193 barrels of oil equivalent per day (boe/d) in the first quarter of 2024, a slight reduction compared to 39,267 boe/d in the previous quarter.

This decrease in production, approximately 3%, was mainly due to natural declines in fields and well failures, as well as community blockades and delays in strategic initiatives of water disposal in its heavy crude oil assets. However, heavy crude oil production increased by 2% thanks to greater activity and production capacity in the Quifa and CPE-6 blocks.

DANIELA MORALES SOLER
Portfolio Journalist

 
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