Frontera Announces 2022 Year End Reserves

Instant Max AI

(Frontera, 22.Feb.2023 — Frontera Energy Corporation (TSX: FEC) today announced the results of its annual independent reserves assessment conducted by DeGolyer and MacNaughton (“D&M“). All dollar amounts in this news release and the company’s financial disclosures are in United States dollars, unless otherwise noted. All of the company’s booked reserves for the year ended December 31, 2022 are located in Colombia and Ecuador.

Orlando Cabrales, Chief Executive Officer, commented:

“I am pleased with Frontera’s 2022 reserves results. We increased average daily production by over 9% to 41,370 Boe/d compared to 2021 while delivering 2P gross reserves of 175 mmboe with a NPV before taxes of $3.7bn, an increase of 22% year over year. Importantly, we grew CPE-6 2P net reserves to 41 mmboe, while increasing annual average production to approximately 5,000 boe/d, demonstrating our success in increasing reserves from less developed fields and passing Quifa for the most reserves by block in the company. We also increased gross gas and liquids reserves by 11% year-over-year to 21 mmboe, supporting our efforts to further diversify our future production mix. Over the last three years Frontera has averaged 16.6 mmboe gross 2P reserves additions, achieved 108% reserves replacement ratio and a 11.6 year reserve life index. Looking ahead, the company will invest $170mn-$200mn in 2023 on its exciting lower risk and near field exploration portfolio in Colombia and Ecuador and high-impact Guyana exploration program, reloading the company’s reserves hopper for future growth.” 

2022 Reserves Report Key Points:

For the year ended December 31, 2022 Frontera:

  • Added 11.6 MMboe of 2P gross reserves, for total company 2P gross reserves of 174.8 MMboe consisting of 64% heavy crude oil, 23% light and medium crude oil, 8% conventional natural gas and 4% natural gas liquids, compared to 178.3 MMboe at 31 December 2021.
  • Added 3.8 MMboe of 3P gross reserves, for a total of 218.5 MMboe at 31 December 2022, compared to 229.8 MMboe at 31 December 2021.
  • The company’s three-year average gross 1P Reserves Replacement Ratio is 95% including 52% in 2022, 175% in 2021 and 57% in 2020. The company’s three-year average gross 2P Reserves Replacement Ratio is 108% including 77% in 2022, 131% in 2021 and 116% in 2020.
  • Delivered a 1P gross reserves life index of 7.4 years compared to 8.7 years at 31 December 2021, and a 2P reserves life index of 11.6 years compared to 13 years at 31 December 2021.
  • The Net Present Value (“NPV“) for the net 2P reserves, discounted at 10% before tax, is $3.7bn at 31 December 2022, compared to $3bn at 31 December 2021. The increase in NPV for the 2P reserves is primarily due to an increase in the forecast oil price used to calculate the NPV. See the Net Present Value After Tax summary table below for more information.
  • Frontera’s 2022 year-end gross 2P reserves of 174.8 mmboe include additions of 4.8 mmboe by technical revisions mainly in CPE-6 and VIM-1 blocks, extensions of 4 mmboe mainly from CPE-6 block, 2.4 mmboe from the company’s acquisition of the remaining 35% working interest (“W.I.“) in Colombia’s El Dificil block held by PCR Investments S.A. (a wholly-owned subsidiary of Petroquímica Comodoro Rivadavia S.A. (“PCR“)), and 0.8 mmboe from exploration activities at Perico and Espejo blocks in Ecuador, offset by production of 15.1 mmboe and 1.1 mmboe in La Creciente block currently closed due to low production volumes and economics. See the reconciliation table below for more information.

2023 Exploration Activities

In 2023, Frontera intends to invest $170mn-$200mn on its Colombia, Ecuador, and Guyana exploration programs, reloading its reserves hopper for future growth.

Colombia and Ecuador: In 2023, the company anticipates spending $50mn-$60mn on various exploration activities in Colombia and Ecuador including drilling the Chimi-1 well (spud on February 16, 2023), Winner-1 and Tubara South-1 exploration wells in VIM-22 block in Colombia and the Yin Sur-1 well in Ecuador; complete civil works on the VIM-1 block at the Hydra well location; carry out initial seismic activities at VIM-46 block; complete an 80-kilometre seismic acquisition program and begin civil works at the Sol Nor-1 and Sol Nor-2 locations at the LLA-119 block; and complete an 164-kilometre seismic acquisition program and Environmental Impact Assessment at LLA-99.

Guyana: On the Corentyne block, offshore Guyana, Frontera anticipates spending approximately $120mn-$140mn on the Wei-1 well. The Wei-1 well is located approximately 14 kilometres northwest of the Joint Venture’s previous Kawa-1 light oil and condensate discovery and will target Maastrichtian, Campanian and Santonian aged stacked sands within channel and fan complexes in the northern section of the Corentyne block. The Wei-1 well will appraise both the Kawa-1 discovery as well as explore additional opportunities within the Corentyne block. 

About The Reserves Evaluation

For the year ended 31 December 2022, the company’s reserves were evaluated by D&M, in accordance with the definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook maintained by the Society of Petroleum Evaluation Engineers (Calgary Chapter) (the “COGE Handbook“), National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101“) and CSA Staff Notice 51-324, and are based on the Reserves Report (as defined below).

2022 Year-End D&M Certified Gross Reserves Volumes(1)

Reserves Category31 December 2022
Mboe(2)
31 December
2021

MBoe (2)
Percentage Change
2022 v 2021
Proved Developed Producing (PDP)39,28731,77824 %
Proved Developed Non-Producing (PDNP)9,95110,461(5) %
Proved Undeveloped (PUD)61,77476,045(19) %
Total Proved (1P)111,013118,284(6) %
Probable63,75259,9576 %
Total Proved Plus Probable (2P)174,765178,241(2) %
Possible (3)43,77051,559(15) %
Total Proved Plus Probable Plus Possible (3P)218,535229,799(5) %
(1) Gross reserves represent Frontera’s W.I. before royalties.
(2) See “Boe Conversion” section in the “Advisories”, at the end of this press release.
(3) Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10%
probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

 2022 Year-End D&M Certified Net Reserves Volumes(1)

Reserves Category 31 December 2022
Mboe (2)
31 December 2021
Mboe (2)
Percentage Change
2022 v 2021
Proved Developed Producing (PDP)34,62529,64017 %
Proved Developed Non-Producing (PDNP)8,7129,483(8) %
Proved Undeveloped (PUD)55,22270,224(21) %
Total Proved (1P)98,559109,346(10) %
Probable58,27457,6701 %
Total Proved Plus Probable (2P)156,833167,016(6) %
Possible (3)39,45950,055(21) %
Total Proved Plus Probable Plus Possible (3P)196,293217,071(10) %
(1) Net reserves represent Frontera’s W.I. after royalties.
(2) See “Boe Conversion” section in the “Advisories”, at the end of this press release.
(3) Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

The following tables provide a summary of the company’s oil and natural gas reserves based on forecast prices and costs effective 31 December 2022, as applied in the Reserves Report. The company’s net reserves after royalties at 31 December 2022, incorporate all applicable royalties under Colombia and Ecuador fiscal legislations based on forecast pricing and production rates evaluated in the Reserves Report, including any additional participation interest related to the price of oil applicable to certain Colombian and Ecuadorian blocks, as at year-end 2022.

2022 Year-End D&M Certified Reserves Volumes by Product Type and Country(6)

Reserves at 31 December 2022 (MMboe) (1)(5)
CountryFieldProved (1P)ProbableProved plus
Probable (2P)
Hydrocarbon Type
GrossNetGrossNetGrossNet
ColombiaQuifa SW field42.435.06.55.348.940.3Heavy crude oil
CPE-6 block21.921.919.219.241.141.1Heavy crude oil
Other heavy oil blocks (2)14.012.37.97.321.819.6Heavy crude oil
Light/medium oil blocks (3)20.717.320.116.540.833.8Light and medium crude oil
Natural gas blocks (4)8.88.85.05.013.813.8Conventional natural gas
Natural gas blocks (4)3.03.04.54.57.57.5Natural gas liquids
Sub-Total110.798.363.157.8173.8156.0
EcuadorLight/medium oil blocks (5)0.30.20.60.50.90.7Light and medium crude oil
Heavy oil blocks(5)0.10.00.00.00.10.0Heavy crude oil
Sub-Total0.40.30.60.51.00.8
Total 31 Dec. 2022111.098.663.858.3174.8156.8
Total 31 Dec. 2021118.3109.360.057.7178.2167.0
Difference(7.3)(10.8)3.80.6(3.5)(10.2)
2022 Production(7)15.112.9Total
Reserves
Incorporated
11.62.7
(1) See “Boe Conversion” section in the “Advisories”, at the end of this press release.
(2) Includes Cajua and Jaspe fields in the Quifa block and the Sabanero block.
(3) Includes the Cubiro, Cravoviejo, Canaguaro, Guatiquia, Casimena, Corcel, Neiva, Cachicamo and other producing blocks.
(4) Includes the VIM-1 and El Difícil blocks.
(5) Includes the Espejo and Perico blocks, which are currently in early evaluation period to better quantify resources.
(6) Gross refers to Frontera’s W.I. before royalties. Net refers to Frontera’s W.I. after royalties.
(7) Gross production distribution: light & medium crude oil 6.2 mmboe, heavy crude oil 7.9 mmboe, conventional natural gas 0.6 mmboe, natural gas liquids 0.3 mmboe
(8) All of the company’s booked reserves are located in Colombia and Ecuador.

2022 2P Reserves Reconciliation

Oil Equivalent
Gross 2P
Reserves
(MMboe) (1)(2)
31 December 2021178.2
Discoveries(3)0.8
Extensions & Improved Recovery(4)4.0
Technical Revisions(5)4.8
Acquisitions(6)2.4
Dispositions(7)(1.1)
Economic Factors0.7
Production(8)(15.1)
31 December 2022174.8
(1) See “Boe Conversion” section in the “Advisories”, at the end of this press release.
(2) Gross refers to Frontera’s W.I. before royalties. Net refers to Frontera’s W.I. after royalties.
(3) Includes discovery of the Tui and Pashuri fields (in the Perico and Espejo blocks in Ecuador).
(4) Mainly associated to extensions in the Hamaca field (in the CPE-6 block in Colombia).
(5) Includes technical revisions mainly in the Hamaca field (in the CPE-6 block) and the La Belleza field (in the VIM-1 block) in Colombia.
(6) Acquisition of 35% working interest in El Difícil field.
(7) Associated with La Creciente block which is currently closed due to low production volumes and economics.
(8) Production represents the Company’s production for the twelve-month period ended December 31, 2022 for assets with associated reserves. Production associated with exploration and evaluation assets are included in production volumes for financial reporting purposes.

Five Year Crude Oil Price Forecast – D&M Reserves Reports (1)

(US$/bbl)20232024202520262027
Brent Oil Price Forecast 202171.4669.6271.0172.4473.88
Brent Oil Price Forecast 202284.6782.6981.0381.3982.65
(1) The Reserves Report and the company’s 31 December 2021 reserves report (the “2021 Reserves Report“) used the average Brent projected price of three major international independent auditors: GLJ Ltd. (“GLJ“), McDaniel and Associates Consultants Ltd. (“McDaniel“) and Sproule Associates Ltd. (“Sproule“). The 2021 price forecast reflects prices used in the company’s 2021 Reserves Report and the 2022 price forecast reflects prices used in the Reserves Report.

Gross Reserve Life Index (“RLI”)(1)

(US$/bbl)31 December 2021(2)31 December 2022(3)
Total Proved (1P)8.7 years7.4 years
Total Proved Plus Probable (2P)13.0 years11.6 years
Total Proved Plus Probable Plus Possible (3P)16.8 years14.5 years
(1) RLI does not have a standardized meaning and may not be comparable to similar measures presented by other companies, and therefore should not be used to make such comparisons.
(2) Calculated by dividing the total relevant net reserves category by the 2021 production of 13.7 MMboe.
(3) Calculated by dividing the total relevant net reserves category by the 2022 production of 15.1 MMboe.

Net Present Value of Future Net Revenue Before Tax Summary – D&M Reserves Report (2022 Brent Forecast)(1)

Reserves Category31 December 202131 December 202231 December 2022
$ (000’s), except per share dataNPV10 ($ 000’s)(2)NPV10 ($ 000’s)(3)NPV10 (C$/share)(4)
Proved Developed Producing (PDP)773,6861,118,38217.70
Proved Developed Non-Producing (PDNP)235,503288,2814.56
Proved Undeveloped1,100,9861,029,91116.30
Total Proved (1P)2,110,1762,436,57538.57
Probable926,1771,277,38820.22
Total Proved Plus Probable (2P)3,036,3533,713,96258.79
Possible (5)894,6681,064,19516.85
Total Proved Plus Probable Plus Possible (3P)3,931,0214,778,15775.64
(1) See “Advisories” at the end of this press release. The Reserves Report used the average Brent projected price of three major international independent auditors: GLJ, McDaniel and Sproule.  The full 1 January 2022 price forecast will be included in the Reserves Report. The January 1, 2021 price forecast is included in the 2021 Reserves Report.
(2) Includes future development costs (“FDC“) as at 31 December 2021, of $792mn for 1P and $1,269mn for 2P.
(3) Includes FDC as at 31 December 2022, of $945mn for 1P and $1,541mn for 2P.
(4) Calculated by dividing the 31 December 2022 NPV10 value by 85,592,075 shares outstanding as at 31 December 2022 and a USD:CAD foreign exchange rate of 1.3549. Per share valuations do not attribute any value to the Company’s material ownership in midstream and infrastructure assets as well as any equity value for its ownership in CGX Energy Inc. (TSXV:OYL) (“CGX“).
(5) Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10 percent probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

Net Present Value of Future Net Revenue After Tax Summary – D&M Reserves Report (2022 Brent Forecast)(1)(2)

Reserves Category31 December 202131 December 202231 December 2022
$ (000’s), except per share dataNPV10 ($ 000’s)(3)NPV10 ($ 000’s)(4)NPV10 (C$/share)(5)
Proved Developed Producing (PDP)608,715766,26112.13
Proved Developed Non-Producing (PDNP)187,470197,0233.12
Proved Undeveloped862,350699,66311.08
Total Proved (1P)1,658,5351,662,94726.32
Probable589,523753,96611.94
Total Proved Plus Probable (2P)2,248,0582,416,91338.26
Possible (6)570,597660,27110.45
Total Proved Plus Probable Plus Possible (3P)2,818,6553,077,18448.71
(1) See “Advisories” at the end of this press release. The Reserves Report used the average Brent projected price of three major international independent auditors: GLJ, McDaniel and Sproule. The full 1 January 2022 price forecast will be included in the Reserves Report.  The 1 January 2021 price forecast is included in the 2021 Reserves Report.
(2) The tax calculations used in the preparation of the Reserves Report are done at the field level in accordance with standard practice, and do not reflect the actual tax position at the corporate level, which may be significantly different.
(3) Includes FDC as at 31 December 2021, of $792mn for 1P and $1,269mn for 2P.
(4) Includes FDC as at 31 December 2022, of $945mn for 1P and $1,541mn for 2P.
(5) Calculated by dividing the 31 December 2022 NPV10 value by 85,592,075 shares outstanding as at 31 December 2022 and a USD:CAD foreign exchange rate of 1.3549. Per share valuations do not attribute any value to the Company’s material ownership in midstream and infrastructure assets as well as any equity value for its ownership in CGX .
(6) Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10 percent probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

Future Development Costs (FDC) – Based on Forecast Prices and Costs(1)

Colombia ($ 000’s)Total Proved (1P)Total Proved Plus Probable (2P)
2023147,757181,951
2024174,636254,771
2025178,302260,127
2026171,409287,429
2027150,668250,514
Beyond 2027117,661301,463
Total undiscounted940,4331,532,897
(1)  Does not include $8.009mn in FDC from Ecuador.

About Frontera’s 2022 Year-End Estimated Reserves

The company’s 2022 year-end estimated reserves were evaluated by D&M in their report dated 15 February 2023, with an effective date of 31 December 2022 (the “Reserves Report“), in accordance with the definitions, standards and procedures contained in the COGE Handbook , NI 51-101 and CSA Staff Notice 51-324. D&M is an independent qualified reserves evaluator as defined in NI 51-101.

Additional reserves information as required under NI 51-101 will be included in the company’s statement of reserves data and other oil and gas information on Form 51-101F1, which is expected to be filed on SEDAR on 1 March 2023. See “Advisory Note Regarding Oil and Gas Information” section in the “Advisories“, at the end of this news release.

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