The Company drilled 15 wells and completed 27 workovers and well services during the third quarter. At Quifa, the Company drilled a new injector well which increased water handling capacity and production. At CPE-6, we grew production to approximately 5,000 bbl/d. At the La Belleza discovery, the Joint Venture expects early gross production of approximately 2,400 boe/d to commence in November 2021. In Ecuador, environmental licensing is complete and road construction is underway in advance of spudding the Jandaya-1 exploration well in the Perico block in early December 2021.
Subsequent to the quarter, Frontera sold its interests in Maurel and Prom Colombia, reducing work commitments by $17.2 million, streamlining its portfolio and focusing on its core assets. "Frontera also acquired approximately 45 million CGX common shares in connection with their rights offering, increasing Frontera's ownership in CGX to 76.98% on a non-diluted basis."
Executive Updates
Effective October 1, 2021, Victor Vega became Vice-President, Field Development, Reservoir Management, and Exploration, replacing Duncan Nightingale. Mr. Vega has more than 30-years industry experience with Amoco, BP, Talisman and Shell in various technical and managerial positions and will lead Frontera's Exploration, Reserves and Technical Support, Reservoir Development functions.
Third Quarter 2021 Operational and Financial Summary:
Q3 2021 Q2 2021 Q3 2020
Operational Results
--------------------------
Heavy crude oil production (bbl/d) 18,168 17,241 21,997
Light and medium crude oil
production (bbl/d) 17,371 17,535 19,820
Total crude oil production
(1) (bbl/d) 35,539 34,776 41,817
Conventional natural gas
production (mcf/d) 5,033 5,164 7,895
Total production (2)(3) (boe/d) (4) 36,422 35,682 43,202
Inventory Balance
Colombia (bbl) 943,121 488,828 708,103
Peru (bbl) 480,200 480,200 1,000,058
Total Inventory (bbl 1,423,321 969,028 1,708,161
Oil & gas sales, net of
purchases (5) ($/boe) 67.13 64.54 40.18
Realized (loss) gain on
risk management contracts ($/boe) (2.68) (8.00) (1.70)
Royalties ($/boe) (4.83) (0.53) (0.23)
Diluent costs ($/boe) (0.15) (0.34) (1.62)
Net sales realized price
(6) ($/boe) 59.47 55.67 36.63
Production costs (7)(9) ($/boe) (11.44) (11.72) (8.55)
Transportation costs
(8)(9) ($/boe) (10.24) (11.15) (10.24)
Operating netback (10) ($/boe) 37.79 32.80 17.84
Financial Results
--------------------------
Oil and Gas Sales, net of
purchases ($M) 164,731 200,581 147,832
Realized (loss) gain on
risk management contracts ($M) (6,570) (24,877) (6,246)
Royalties ($M) (11,848) (1,640) (861)
Diluent costs ($M) (366) (1,056) (5,954)
Net sales (10) ($M) 145,947 173,008 134,771
Net income (loss)(11) ($M) 38,531 (25,648) (90,473)
Per share -- basic ($) 0.40 (0.26) (0.93)
Per share -- diluted ($) 0.39 (0.26) (0.93)
General and administrative ($M) 12,656 14,132 10,539
Operating EBITDA (10) ($M) 72,646 84,771 52,113
Cash provided by operating
activities ($M) 79,114 87,391 35,929
Capital expenditures (12) ($M) 103,220 61,214 2,905
Cash and cash equivalents
- unrestricted ($M) 318,791 358,325 259,980
Restricted cash short and
long-term ($M) 100,692 128,283 161,318
Total cash, including
restricted cash ($M) 419,483 486,608 421,298
Total debt and lease
liabilities ($M) 563,173 565,238 557,182
Consolidated total
indebtedness (Excl.
Unrestricted
Subsidiaries) (13) ($M) 401,148 468,424 352,058
Net Debt (Excluding
Unrestricted
Subsidiaries) (13) ($M) 130,680 138,701 113,054
1. Reference to crude oil or natural gas production
in the above table and elsewhere in the Company's
management
discussion & analysis for the three and nine months
ended September 30, 2021 (the "MD&A") refer to the
light and medium crude oil and heavy crude oil and
conventional natural gas, respectively, product types
in National Instrument 51-101- Standards of Disclosure
for Oil and Gas Activities.
2. Represents working interest production before royalties
and total volumes produced from service contracts.
Refer to the "Further Disclosures" section on page
25 of the MD&A.
3. Conventional Natural gas liquids have not been
presented separately because production for such type
was immaterial to the Company.
4. Boe has been expressed using the 5.7 to 1 Colombian
Mcf/bbl conversion standard required by the Colombian
Ministry of Mines & Energy.
5. "Oil & Gas sales, net of purchases" is a non-IFRS
measure and includes crude oil and natural gas sales,
net of the cost of volumes purchased from third-party.
For further detail refer to the "Non-IFRS Measures"
section on page 16 of the MD&A.
6. Per boe is calculated using sales volumes from
development and producing ("D&P") assets. Volumes
purchased from third parties are excluded.
7. Per boe is calculated using production.
8. Per boe is calculated using net production after
royalties.
9. Prior period figures are different compared with
those previously reported as a result of a reclassification
from production cost to transportation cost and diluent
cost by approximately ($0.40/boe), $0.30/boe and $0.10/boe
per quarter, respectively. The reclassification was
related to certain logistic and refining processes
fees of own crude oil previously recorded as production
cost.
10. Refer to the "Non-IFRS Measures" section on page
16 of the MD&A. This section also includes a description
and details for all per boe metrics included in operating
netback.
11. Net loss (income) attributable to equity holders
of the Company.
12. Capital expenditures include costs, net of income
from exploration and evaluation ("E&E") assets.
13. Refer to the "Non-IFRS Measures" section on page
16 of the MD&A. ("Unrestricted Subsidiaries") include
CGX Energy Inc.("CGX"), ODL JV Ltd., and Frontera
Bahía Holding Ltd including its subsidiary Sociedad
Portuaria Puerto Bahía S.A. ("Puerto Bahia").
Operational Update
Guyana
On August 22, 2021, Frontera and majority-owned subsidiary and co-venturer CGX commenced drilling operations on the Kawa-1 exploration well and CGX exercised its option to drill a second well with Maersk Drilling Holdings Singapore Pte ("Maersk") through the use of the Maersk Discoverer rig. Operations at Kawa-1 have proceeded on schedule and comprehensive planning by the Joint Venture has resulted in effective contingency planning and a final well plan and design that has allowed the well to progress without a major individual setback to date. Four of five planned casing strings have been landed and cemented in place with two contingency casing strings still available for use if required. As of November 1, 2021, close to 78% of the planned footage has been drilled and the three main prospective targets of the Kawa-1 well remain to be drilled, cased and evaluated with current expectations on reaching total depth consistent with the previous public disclosure of December 2021.
The Kawa-1 well will test the easternmost channel/lobe complex on the northern section of the Corentyne block. The primary target at Kawa is a Santonian age channel/fan, with secondary targets in the Campanian and deeper Santonian. The primary target has the best and brightest amplitudes in the Santonian, and most definitive trap definition.
Frontera and majority-owned subsidiary and co-venturer CGX hold over 1.4 million gross acres in the Guyana-Suriname basin. Additional drill-ready prospects have been identified in the North Corentyne area and several exploration leads are being matured. CGX continues to advance its development of its Berbice deep water harbor project to support the rapidly expanding local oil and gas industry including its own activities.
Colombia
Production averaged 36,422 boe/d, up 2% compared to 35,682 boe/d in the prior quarter and 43,202 boe/d in the third quarter of 2020. Higher production quarter over quarter was a result of production growth in the CPE-6 and Quifa blocks resulting from water handling improvements during the third quarter.
Currently, the Company has three drilling rigs and six workover rigs active at its Quifa, Coralillo and Abanico operations. In the third quarter of 2021, the Company drilled 15 wells and completed 27 workovers and well services. Year to date, the Company has drilled 28 wells and completed workovers/well services and other activities at 86 others.
At Quifa, current production is approximately 16,300 bbl/d (including both Quifa and Cajua). Frontera drilled one new injector well and converted one inactive well into an injector well, which the Company expects will contribute to increased production volumes from the Block through year-end as water disposal volumes increase. Year to date, Frontera has drilled 13 development wells at Quifa and the Company expects to drill an additional 10 development wells in the fourth quarter.
At CPE-6, current production is approximately 5,000 bbl/d due to continued drilling and construction of additional water-handling facilities.