• Production Increase: 5% quarter-over-quarter to 39,912 barrels per day.

• Heavy Crude Oil Production: Increased 6% quarter-over-quarter to approximately 24,800 barrels per day.

• Net Loss: $2.8 million or $0.03 per share for the second quarter.

• Operating EBITDA: Approximately $110 million for the quarter.

• Cash Flow from Operations: $150 million for the quarter.

• Capital Expenditures: Roughly $80 million for the quarter.

• Dividend Declared: $0.0625 Canadian per share, totaling $11.7 million year-to-date.

• Share Buyback: $6.6 million year-to-date under NCIB.

• Operating Netback: $46.40 per BOE, up from $43.97 per BOE in the prior quarter.

• Total Cash Position: $215 million as of June 30, 2024.

• ODL EBITDA: Approximately $68 million for the second quarter.

• Warning! GuruFocus has detected 3 Warning Sign with FECCF.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Frontera Energy Corp (FECCF) entered into a two-year contract with Ecopetrol to treat and dispose of water from the Quifa Block, which is expected to increase crude oil production capacity.

• The company aims to increase processing capacity at the SAARA facility to 250,000 barrels per day by the end of 2024, enhancing production efficiency.

• Frontera announced a joint venture with GASCO to develop LPG import facilities in Colombia, demonstrating a commitment to expanding energy infrastructure.

• The company declared a quarterly dividend of $0.0625 Canadian per share and announced a substantial issuer bid to purchase $30 million of its common shares, indicating strong shareholder returns.

• Production increased approximately 5% quarter over quarter, with heavy crude oil production growing by 6%, driven by increased water disposal capacity and new injector wells.

Negative Points

• Frontera Energy Corp (FECCF) reported a net loss of $2.8 million for the second quarter, impacted by finance costs, risk management contract losses, and income tax expenses.

• The company faced inflationary pressures on costs, particularly in production and well service activities, affecting overall profitability.

• Despite increased production, light and medium crude oil production remained flat due to natural declines in Colombian fields.

• The company experienced a decrease in purchased crude net margin, reflecting lower dilution and impacting operating netbacks.

• Concerns were raised regarding the extension of licenses in Guyana, with potential implications for ongoing operations and strategic partnerships.

Q & A Highlights

Q: Could you explain the changes in your energy and production costs? A: Rene Burgos Diaz, CFO: Energy costs are down due to the normalization of electricity prices post-dry season, and we expect this trend to continue. However, production costs have increased due to additional workover activities and inflationary pressures, which we expect to normalize later in the year.

Q: What is the expected EBITDA contribution from the Reficar connection, and what is the timeline for its operation? A: Rene Burgos Diaz, CFO: The Reficar connection is expected to be operational by December 2024. While we haven't provided specific EBITDA guidance, we anticipate significant volume increases through the port, potentially doubling current volumes, which should drive substantial EBITDA growth.

Q: Can you provide details on the $90 million tax refund and the expected tax situation for the year? A: Rene Burgos Diaz, CFO: The $90 million refund is due to last year's withholding tax payments exceeding our actual tax bill, offset by deferred tax assets. For the full year, we expect a net tax benefit of between $10 million and $20 million.

Q: Is the $30 million share repurchase program contingent on the sale of the infrastructure business? A: Rene Burgos Diaz, CFO: No, the share repurchase program is not contingent on any strategic transaction. We plan to use the $30 million by October 2024, and this initiative is independent of any asset sales.

Q: What is the status of the Guyana operations, and how does it affect your strategic plans? A: Orlando Cabrales Segovia, CEO: We are in regular, constructive discussions with the Guyana government regarding the Corentyne block. There are no changes to our licenses, and we continue to pursue strategic alternatives and partnerships for our operations in Guyana.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.