Frontera Energy Corporation · TSX:FEC
Frontera Energy — Investor Presentation (October 2017)
32 slides from Frontera Energy's investor presentation, October 2017
Slide 1: The New Frontera
The New Frontera October 2017
Slide 2: Advisories
Advisories This presentation contains forward-looking statements. All statements, other than statements of historical fact that address activities, events or developments that Frontera Energy Corporation (the “Company” or “Frontera”) believes, expects or anticipates will or may occur in the future (
Slide 3: Corporate Snapshot
Corporate Snapshot The New Frontera Capital Structure Q2’17 Production Mix Shares Outstanding (FEC on TSX)(1) ~50MM Natural Gas Market Cap(1) ~$1,750MM Heavy Oil 9% Cash and Cash Equivalents(2)(3) ~$540MM / ~$439MM 72.4 38% Long-term Debt (B+ Rated)(3) ~$250MM Mboe/d Minority Interest(3) ~$112MM 53%
Slide 4: Second Quarter 2017 Operational & Financial Highlights
Second Quarter 2017 Operational & Financial Highlights Strong EBITDA and Cash Flow in Excess of Capital Expenditures Q2’17 Q1’17 PRODUCTION / REVENUE / PRICE Flat production helped by increased light and medium oil from Average Net Production(1) 72,370 boe/d 72,524 boe/d Peru, offset by declines in
Slide 5: Well Recompletions Drive Improved Capital Efficiencies
Well Recompletions Drive Improved Capital Efficiencies Cost Effective Production Additions 2017 Drilling Activity 2017 Drilling Program 40 • 50-60 Development Locations 35 • 80-90 Workovers and Well Services 30 • 3 Exploration Wells (Potential 5 with Success) 25 20 Inactive Well Inventory Provides F
Slide 6: 2017 Guidance Reflects Comprehensive Asset Review
2017 Guidance Reflects Comprehensive Asset Review 2%-9% Exit to Exit Production Growth, Balanced Capex and EBITDA 2017 Capital Expenditures Forecasts Other Forecasts Budgeted Capital Expenditures $250 - $300MM Operating EBITDA(1) $275 - $300MM Maintenance & Development $170 - $175MM Estimated Total
Slide 7: The New Frontera Strategy
The New Frontera Strategy Balance Returns on Invested Capital, Growth, Oil Mix, and Geographies Returns Focused Development of Assets Exploration Upside Key Asset Areas: Key Prospects: • Deep Llanos • Guatiquia (Alligator 1x) • Central Llanos • Block 192 • Heavy Oil at Quifa and CPE-6 • Llanos 25 •
Slide 8: Strategic Review of Assets
Strategic Review of Assets Portfolio Enhancement: Detailed Reservoir Study During the second quarter of 2017, consistent with the new progressive and disciplined approach to capital allocation, the Company made the strategic decision to slow down production volumes and focus its resources on conduct
Slide 9: Leading Latin American Upstream Portfolio
Leading Latin American Upstream Portfolio Diversified Portfolio of Production, Development and Exploration Frontera Production History (Mboe/d) 70 - 75 80 75.1 72.5 72.4 69.4 60 40 20 0 3Q'16 4Q'16 1Q'17 2Q'17 Exit Colombia Peru Guidance 9
Slide 10: Production & Development Optimization
Production & Development Optimization Quifa: Legacy Heavy Oil Asset • Currently producing ~25 Mbbl/d net • 65 well infill program expected to largely mitigate short-term production decline • 15 well vertical program targeting reserve replacement • Cajúa: technical study initiated with the goal of im
Slide 11: Production & Exploration Upside
Production & Exploration Upside Guatiquía: Building on Deep Llanos Success • Recent development success at Avispa-14, Avispa-8, Ardilla 2 and Ardilla 3 • Drilling Ardilla 4 & injector, and Avispa-9, 11 & 12 in Q4, potentially two or three rigs for development and exploration • Ardilla-3 LS-1 encount
Slide 12: Significant Exploration Upside
Significant Exploration Upside Llanos 25: Acorazado Exploration Upside and Reserve Replacement • Proven hydrocarbon fairway on trend with Cusiana & Cupiagua fields • Potential high rate wells (10,000bbl/d unrisked)(1) • 273 km2 of high quality 3D seismic data and extensive reprocessed 2D seismic dat
Slide 13: Production & Development
Production & Development Cubiro: Growing with Secondary Recovery & Enhanced Field Development. • Recent development successes were horizontal wells is Copa-23H, Copa-26H, and Copa 29H • Drilling Copa A Norte-4stH and Copa-27H in Q4 2017 • Estimation of OOIP is approximately 100 MMBBL with only 11.5
Slide 14: Production & Exploration Upside
Production & Exploration Upside CPE-6: Exploration Upside and Reserve Replacement • Heavy oil field currently producing approximately 1,300 bbl/d • Hamaca: two horizontal wells to be drilled by end 2017 • Surrounding area covered with 3D seismic + 2 D seismic • Two exploration wells to be drilled by
Slide 15: Production & Exploration Upside
Production & Exploration Upside Block 192: Production Growth Opportunity • Largest oil producing block in Peru: near- term production potential of 5 to 10 Mbbl/d • Opportunity to add significant production and reserves by extending the contract with the Peruvian government • Significant exploration
Slide 16: Unlocking Value: Asset Sale Summary
Unlocking Value: Asset Sale Summary Over $250 Million in Cost Savings Achieved to Date Below is a summary of all the non-core asset sales of exploration and production blocks executed by the Company to date; many are pending final government approvals $ millions Cash Exploratory SBLC / Block Country
Slide 17: Unlocking Value: Monetizing Hidden Value
Unlocking Value: Monetizing Hidden Value Non-Core Midstream & Infrastructure Monetizable Assets PUERTO BAHÍA PETROELÉCTRICA DE LOS LLANOS(4) (41.8% Gross(1), 39.6% Net(2)) (100.0% Gross(1), 63.6% Net(2)) Other Major Shareholders: International Finance Power transmission line of 230 kV that connects
Slide 18: Unlocking Value: Reducing Costs, Increasing Cash Flow
Unlocking Value: Reducing Costs, Increasing Cash Flow Addressing Highly Fixed Transportation Costs Bicentenario PIPELINE(1) (43% Gross(2), 28.9% Net(3)) • Runs from Araguaney to Banadia, connecting to Caño Limón-Coveñas (CLC) pipeline • Committed Capacity: 47,333 bbl/d • Cost Reduction Initiatives:
Slide 19: Balance Sheet Strength
Balance Sheet Strength Cost Reduction Initiatives Continue Evolution of Frontera G&A Cost ($/boe) Balance Sheet Metrics (June 30, 2017) 36% Debt to Book Cap 17.3% $6.34 Reduction (2) $5.37 Gross Debt/EBITDA(1) 0.9x $4.34 $4.05 $3.10 Net Debt/EBITDA(1) (0.7x) $2.56 Interest Coverage(1) 11.3x No Debt
Slide 20: Liabilities Continue to Decrease
Liabilities Continue to Decrease Balance Sheet Improvement Continues Variation Variation (Q2’17 vs. (Q2’17 vs. 6,953 6,922 -85% Q2’16) Q1’17) 862 764 Others liabilities(1) Accounts payable -5% -8% 288 343 and accrued liabilities -38% -9% Loans and borrowings 5,803 5,815 -96% 0% 315 299 274 1,141 1,1
Slide 21: Positive Working Capital
Positive Working Capital Growing Working Capital, Normalized Sales and Payment Cycle Working capital Cash and cash equivalents Accounts receivable Inventories and others Cash and cash equivalents Trade receivable Crude oil inventory Restricted cash Other receivables Material Inventory Receivable fro
Slide 22: Significant Value with Catalysts for Upside
Significant Value with Catalysts for Upside Frontera Trades at a Deep Discount to Peers, Unique Upside Opportunity Enterprise Value (“EV”) / 2017 EBITDA(1) EV / 2P Reserves ($ per boe)(2) $20 8.0x Average 6.8x 6.6x Average $16.01 6.2x $15 6.0x 4.6x $11.64 4.6x $10.23 4.1x $10 $8.79 4.0x $6.13 $5.54
Slide 23: Reasons to Own Frontera
Reasons to Own Frontera Significant Value with Catalysts 1. Compelling Discounted Valuation & Near-term Catalysts to Unlock Value: • Contract renegotiations (Peru, Pipelines) • Portfolio optimization through non-core asset dispositions • Exploration drilling opportunities (Alligator 1x, Llanos 25) •
Slide 24: Appendix
Appendix
Slide 25: Restructuring Process and Go Forward Strategy
Restructuring Process and Go Forward Strategy Path to Increasing Equity Demand and Liquidity • 2H 2017 aggressive Complete • Creditor and Catalyst led marketing campaign restructuring completed • Go-forward strategy reducing overall debt to disseminated across Restructuring $250MM from $5.4BN the ma
Slide 26: Capital Markets Strategy and Planning
Capital Markets Strategy and Planning Unlocking the Value with a Proven Plan • Deliver on our Catalysts: • Conference and Non Deal Roadshows in 2H • Peru Extension / Renegotiation 2017 to target over 250 client interactions • Production Guidance • Increase daily liquidity to over C$3MM in • Asset Op
Slide 27: Current Hedging Portfolio 2017-2018
Current Hedging Portfolio 2017-2018 As at September 25, 2017 FWD Sep 25th Floor Ceiling Price level used for market guidance 60.00 $60 59.60 59.31 58.04 57.64 57.36 57.17 57.02 USD/bble 56.88 56.75 56.64 56.52 56.37 55.63 57.14 $56 55.73 55.86 55.91 55.45 55.28 55.37 55.16 52.00 $52 51.56 51.10 51.2
Slide 28: Transportation Commitments Summary
Transportation Commitments Summary Capacity and Commitments Balanced when Bicentenario Working Commitments Transportation (As per Note 16 of Financial Statements) (Take or Pay/Ship or Pay) 3,515 340 3,116 218 Other ToP(3) 288 59 422 P135(4) 3,116 482 52 CENIT (CLC) 423 BIC - 110K BPD 750 405 376 913
Slide 29: 2016 Reserves Revisions
2016 Reserves Revisions Prudently Reassessed Reserves, D&M and RPS Reviewed Economic write-down due to lower oil prices 291 38 40 36 14 6 171 9 5 6 Technical write-down 2015 2P 2016 Río La Lote Z1 Other Quifa Guatiquía CPE-6 2016 2P Production Ariari Creciente Revisions 29
Slide 30: Proven Management Team
Proven Management Team Latin American Expertise and Strategic Know How Barry Larson • Over 40 years of oil & gas industry experience including 21 years of international experience CEO • Former VP, Ops. & COO of Petro Andina and subsequently Parex after the company was acquired • Co-founder and forme
Slide 31: Independent Board of Directors
Independent Board of Directors Engaged and Active in Generating Shareholder Value Gabriel de Alba • Managing Director and Partner of The Catalyst Capital Group Inc. Chairman • International experience restructuring public and private companies, unlocking value for investors Luis F. Alarcon • Former
Slide 32: Investor Relations Contact
INVESTOR RELATIONS CONTACT: Grayson M. Andersen Corporate Vice President, Capital Markets Calle 110, No 9 – 25, Piso 16 Bogota DC, Colombia +57 (314) 250-1467 gandersen@fronteraenergy.ca ir@fronteraenergy.ca
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