Recorded Net Income of
Generated Operating EBITDA of
Increased Average Daily Production 1% to 42,049 Boe/d,
Increased Quifa and CPE-6 Quarter Over Quarter Average Daily Production by 8.4%
Standalone and Growing Midstream Business Generated
Entered Into Agreement To Connect
Discovered 210 Feet of Hydrocarbon-Bearing Sands in the Santonian, 77 Feet of Net Light Oil and Sweet Medium Crude Pay in the Campanian and Maastrichtian at the Wei-1 Well, Offshore Guyana
Achieved 102% of 2022 ESG Goals, Invested
"Frontera continues to efficiently execute on its financial, operating, and strategic plan for its three core businesses. In the Company's
In its potentially transformational Guyana Exploration business, Frontera and CGX Energy, its joint-venture partner, discovered 210 feet of hydrocarbon-bearing sands in the Santonian horizon and 77 feet of net light oil and sweet medium crude pay in the Campanian and Maastrichtian horizons at the Wei-1 well, offshore
In its standalone and growing Colombia Midstream business, the Company generated quarterly adjusted midstream EBITDA of
"Frontera demonstrated positive second quarter results. We increased average daily production by 1% to 42,049 boe/d for the quarter as we successfully brought-back-online production after the road blockades that occurred during the first quarter and increased water-handling capacity at Quifa and CPE-6 where production improved 8.4%. We also grew natural gas liquids production by 41% to 1,823 boe/d through increased gas reinjection at VIM-1. Subsequent to the quarter, we achieved daily record production at CPE-6 of 6,177 bbl/d.
Our total cash position including restricted cash as of the second quarter increased to
Importantly, during the quarter, we released our annual Sustainability Report, highlighting investments in 218 projects benefiting more than 73,100 people in
Second Quarter 2023 Operational and Financial Summary
Q2 2023 | Q1 2023 | Q2 2022 | ||
Operational Results | ||||
Heavy crude oil production (1) | (bbl/d) | 24,051 | 22,270 | 21,455 |
Light and medium crude oil combined production (1) | (bbl/d) | 15,188 | 16,518 | 17,348 |
Total crude oil production | (bbl/d) | 39,239 | 38,788 | 38,803 |
Conventional natural gas production (1) | (mcf/d) | 5,626 | 8,590 | 10,374 |
Natural gas liquids production (1) | (boe/d) | 1,823 | 1,291 | 963 |
Total production (2) | (boe/d) (3) | 42,049 | 41,586 | 41,586 |
Inventory Balance | ||||
(bbl) | 881,758 | 1,032,876 | 922,719 | |
(bbl) | 480,200 | 480,200 | 480,200 | |
Ecuador | (bbl) | 72,550 | 98,125 | 20,776 |
Total Inventory | (bbl) | 1,434,508 | 1,611,201 | 1,423,695 |
Oil and gas sales, net of purchases (4)(5) | ($/boe) | 67.91 | 69.07 | 102.80 |
Realized (loss) on risk management contracts (6) | ($/boe) | (0.80) | (1.16) | (1.15) |
Royalties (6) | ($/boe) | (3.02) | (3.36) | (10.57) |
Net sales realized price (4)(5) | ($/boe) | 64.09 | 64.55 | 91.08 |
Production costs (5)(6) | ($/boe) | (14.01) | (12.07) | (12.51) |
Transportation costs (5)(6) | ($/boe) | (11.40) | (11.20) | (10.80) |
Operating netback per boe (4) | ($/boe) | 38.68 | 41.28 | 67.77 |
Financial Results | ||||
Oil and gas sales, net of purchases (7) | ($M) | 221,218 | 189,120 | 311,253 |
Realized (loss) on risk management contracts | ($M) | (2,600) | (3,175) | (3,476) |
Royalties | ($M) | (9,837) | (9,213) | (32,018) |
Net sales (7) | ($M) | 208,781 | 176,732 | 275,759 |
Net income (loss) (8) | ($M) | 80,207 | (11.330) | 13.484 |
Per share – basic | ($) | 0.94 | (0.13) | 0.14 |
Per share – diluted | ($) | 0.92 | (0.13) | 0.14 |
General and administrative | ($M) | 12,422 | 12,669 | 15,097 |
Outstanding Common Shares | Number of | 85,188,573 | 85,188,573 | 92,676,495 |
Operating EBITDA (7) | ($M) | 116,461 | 91,922 | 190,678 |
Cash provided by operating activities | ($M) | 183,560 | 845 | 246,615 |
Capital expenditures (7) | ($M) | 154,860 | 131,452 | 93,835 |
Cash and cash equivalents – unrestricted | ($M) | 180,294 | 162,272 | 295,098 |
Restricted cash short and long-term (9) | ($M) | 33,485 | 30,877 | 57,975 |
Total cash (9) | ($M) | 213,779 | 193,149 | 353,073 |
Total debt and lease liabilities (9) | ($M) | 532,273 | 519,471 | 535,454 |
Consolidated total indebtedness (Excl. Unrestricted Subsidiaries) (10) | ($M) | 415,395 | 400,361 | 473,095 |
Net Debt (Excl. Unrestricted Subsidiaries) (10) | ($M) | 286,675 | 279,843 | 231,913 |
1. References to heavy crude oil, light and medium crude oil combined, conventional natural gas and natural gas liquids in the above table and elsewhere in this news release refer to the heavy crude oil, light crude oil and medium crude oil combined, conventional natural gas and natural gas liquids, respectively, product types as defined in National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). |
2. Represents W.I. production before royalties. Refer to the "Further Disclosures" section of the Company's management's discussion and analysis for the three months ended |
3. Boe has been expressed using the 5.7 to 1 Mcf/bbl conversion standard required by the |
4. Non-IFRS ratio (equivalent to a "non-GAAP ratio", as defined in National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure ("NI 52-112"). Refer to the "Non-IFRS and Other Financial Measures'' section. |
5. 2022 prior period figures are different compared with those previously reported as a result of the exclusion of Promotora Agricola de los Llanos S.A ("ProAgrollanos") revenues and, production and transportation cost. |
6. Supplementary financial measure (as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section. |
7. Non-IFRS financial measure (equivalent to a "non-GAAP financial measure", as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section. |
8. Net income (loss) attributable to equity holders of the Company. |
9. Capital management measure (as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section. |
10. "Unrestricted Subsidiaries" as of |
Second Quarter 2023 Operational and Financial Results:
- The Company recorded net income of
$80.2 million or$0.94 /share in the second quarter of 2023, compared with a net loss of$11.3 million or ($0.13 /share) in the prior quarter and net income of$13.5 million or$0.14 /share in the second quarter of 2022. The Company's second quarter net income included operating income of$55.6 million (including$35.5 million of net of recovery of asset retirement obligations and impairment expenses),$14.3 million of share of income from associates,$17.0 million foreign exchange gain and$1.5 million in finance income, partially offset by$15.7 million in finance expenses and income tax expenses of$2.6 million . - Production averaged 42,049 boe/d (consisting of 24,051 bbl/d of heavy crude oil, 15,188 bbl/d of light and medium crude oil, 5,626 mcf/d of conventional natural gas and 1,823 boe/d of natural gas liquids) in the second quarter of 2023, compared to 41,586 boe/d in the prior quarter and 41,586 boe/d in the second quarter of 2022. See the table above for production by product type for the prior quarter and second quarter of 2022. The increase in production quarter over quarter was mainly a result of successful development drilling in the Company's Quifa and CPE-6 blocks, and the start-up of injection facilities in the VIM-1 block partially offset by decreases in light and medium crude oil combined and conventional natural gas production due to natural declines and the return of the Neiva and Orito blocks following the completion of the blocks' production contracts, which contributed approximately 670 boe/d.
- Operating EBITDA was
$116.5 million in the second quarter of 2023, up 27% compared with$91.9 million in the prior quarter and$190.7 million in the second quarter of 2022. The increase in operating EBITDA quarter-over-quarter was primarily a result of increased sales during the quarter. - As of
June 30, 2023 , the Company had a total inventory balance inColombia of 0.9 million barrels, including 0.6 million crude oil barrels and 0.3 million barrels of diluent and others. This compared to 1.0 million barrels in the prior quarter and 0.9 million barrels atJune 30, 2022 . The decrease in inventory balance was primarily due to inventory drawn for export sales as highlighted during our first quarter release. The Company expects these inventory draws to continue during the third quarter. Inventory balances in the second quarter related toEcuador andPeru were 0.1 million barrels and 0.5 million barrels, respectively. - Capital expenditures were approximately
$154.9 million in the second quarter of 2023, compared with$131.5 million in the prior quarter and$93.8 million in the second quarter of 2022. Capital spending during the quarter was primarily deployed to drill 19 development wells, improve flowlines, build a storage tank and other facilities at CPE-6, drill two exploration wells and complete Wei-1 exploration drilling activities. - Cash provided by operating activities in the second quarter of 2023 was
$183.6 million , compared with$0.8 million in the prior quarter and$246.6 million in the second quarter of 2022. The increase in cash provided by operating activities quarter-over-quarter was primarily due to higher production, inventory sales, and realized foreign exchange gains, partially offset by lower Brent oil prices. - The Company reported a total cash position of
$213.8 million onJune 30, 2023 , compared to$193.1 million atMarch 31, 2023 and$353.1 million atJune 30, 2022 . In the second quarter, the Company invested$154.9 million in capital expenditures, including$72.8 million related to Guyana Wei-1 exploration well, and$26.7 million in debt service payments. The Company also borrowed$20.0 million under a new working capital loan facility with a maturity date ofDecember 2023 . This working capital loan is an important milestone for the Company as it marks the first time the Company has accessed traditional bank funding. - Frontera's realized price in the second quarter was
$64.09 /boe, compared with$64.55 /boe in the previous quarter and$91.08 /boe in the second quarter of 2022. The slight variance quarter-over-quarter was driven by the decrease in the Brent oil price benchmark partially offset by better oil differentials, lower royalties, and a lower realized loss on risk management contracts. - The Company's operating netback was
$38.68 /boe in the second quarter of 2023, compared with$41.28 /boe in the prior quarter and$67.77 /boe in the second quarter of 2022. The decrease in operating netback quarter-over-quarter was primarily due to lower realized price, foreign exchange impacts and increased production costs. - Production costs averaged
$14.01 /boe, in the second quarter of 2023 compared with$12.07 /boe in the prior quarter and$12.51 /boe in the second quarter of 2022. The increase in production costs quarter-over-quarter was primarily a result of foreign exchange impacts, higher energy and internal transportation costs, and well services. - Transportation costs averaged
$11.40 /boe in the second quarter of 2023 compared with$11.20 /boe in the prior quarter and$10.80 /boe in the second quarter of 2022. The increase in transportation costs quarter-over-quarter was mainly due to higher volumes transported inColombia and increased transportation tariffs. - Cost of purchases for the second quarter 2023 was
$66.6 million including the transportation and processing fees for purchased volume sold, compared with$59.0 million in the first quarter 2023 due to additional volumes acquired partially offset by lower Brent benchmark oil prices. The sale of the purchased volumes generated an income of$59.9 million during the second quarter compared to$51.3 million in the first quarter 2023. - During the second quarter of 2023, the Company recognized a gain of
$9.0 million as a result of the early termination of some zero-cost collar foreign exchange risk management contracts. The Company subsequently re-hedged these monetized positions at updated market strike prices. Consistent with the company's hedging policies, Frontera has approximately 40% of its foreign currency risked hedged through zero- cost collars through the end of 2023 at theCOP 4,300 to 4,900 range. In terms of crude oil hedges, the Company has hedged approximately 40% of its production throughNovember 2023 at a range of$70 /bbl to$80 /bbl. - The Company's Midstream business demonstrated solid performance: for ODL, total volumes pumped were 243,490 bbl/d during the second quarter of 2023, up 8% compared to the prior quarter and 16% versus the second quarter of 2022.
Puerto Bahia liquid volumes were 73,714 bbl/d during the second quarter up 17% compared to the prior quarter and up 15% compared to the second quarter of 2022. - Adjusted Midstream EBITDA in the second quarter of 2023 was
$30.4 million , compared with$28.2 million in the prior quarter and$16.4 million in the second quarter of 2022. The increase quarter over quarter was driven by both higher volumes transported through ODL and higher throughput volumes inPuerto Bahia liquids port facility. - Frontera, in a joint venture ("Joint Venture") with CGX, has successfully reached the total depth of 20,450' on the Wei-1 exploration and appraisal well. The well discovered approximately 71 feet of net oil pay in the Maastrichtian and Campanian horizons and 210 feet of hydrocarbon-bearing sands in the Santonian horizon. Independent third-party analysis is underway to determine Santonian net pay and further evaluate this interval. The Joint Venture is excited by the definitive presence of oil in the Maastrichtian and Campanian and the presence of hydrocarbons in the Santonian and believes there is significant potential in the block.
Frontera's ESG Strategy
During the quarter, the Company released its 2022 Sustainability Report, which highlighted significant achievements and set forth its ESG targets for 2023. In 2022, Frontera achieved 102% of its ESG goals - underscoring the Company's dedication to aligning its business objectives with its ESG goals and demonstrating that responsible corporate stewardship and robust business performance are mutually reinforcing.
For 2023, Frontera has set ambitious ESG targets, including (i) neutralizing 50% of its GHG (greenhouse gas) emissions through carbon credits, (ii) inaugurating its first solar farm at block CPE-6, (iii) commissioning one of its most important circular economy projects with its SAARA water treatment facility, (iv) recycling 15% of operational water used and (v) preserving an additional 1,000 hectares of biological corridors in Casanare and Meta.
Frontera's Three Core Businesses
Frontera's three core businesses include: (1) its
1.
During the quarter, Frontera produced 41,436 boe/d from its Colombian operations (consisting of 24,051 bbl/d of heavy crude oil, 14,575 bbl/d of light and medium crude oil combined, 5,626 mcf/d of conventional natural gas and 1,823 boe/d of natural gas liquids).
In the second quarter of 2023, the Company drilled 19 development wells at Quifa, CPE-6 and Cubiro blocks and one injector well at the CPE-6 block. This compares to 17 development wells in the prior quarter.
Currently, the Company has 2 drilling rigs and 1 workover rig active at its Quifa, CPE-6, Corcel/Guatiquia and Mapache blocks in
Quifa Block: Quifa SW and Cajua
Production from the Quifa SW and Cajua fields averaged approximately 18,408 bbl/d of heavy crude in the second quarter of 2023 compared to approximately 16,829 bbl/d of heavy crude oil in the first quarter of 2023. The Company drilled 12 production wells (seven wells at Quifa and five wells at Cajua) on the blocks in the second quarter of 2023.
The Company's current water handling capacity is approximately 1.6 million bwpd in Quifa. Increasing water handling capacity is key to Frontera's efforts to grow production at Quifa. In 2023, Frontera began recommissioning SAARA (previously known as Agrocascada), its reverse osmosis water treatment facility with an estimated 1 million bwpd nameplate capacity. As of
CPE-6
At CPE-6, production averaged approximately 5,116 bbl/d of heavy crude oil in the second quarter 2023 compared with approximately 4,850 bbl/d in the first quarter of 2022. During the quarter, the Company drilled five development wells and one injector well. Subsequent to the quarter, the Company achieved record daily production at CPE-6 of 6,177 bbl/d. During the quarter, Frontera invested in the expansion and improvement of the development facilities in the CPE-6 block, which will double water-handling capacity to 240,000 bbls/day by the end of 2023 and support additional growth for the field.
Other Colombia Developments
At Guatiquia, production averaged approximately 7,228 bbl/d of light and medium crude oil in the second quarter of 2023 compared with approximately 7,317 bbl/d in the first quarter of 2022.
During the quarter, Cubiro production averaged approximately 1,915 bbl/d of light and medium crude oil in the second quarter of 2023 compared with approximately 2,180 bbl/d in the first quarter of 2022. The Company drilled two development wells.
At VIM-1 (Frontera 50% W.I., non-operator), production averaged 1,171 bbl/d of light and medium crude oil in the second quarter of 2023 compared to approximately 1,711 bbl/d of light and medium crude oil in the first quarter of 2023.
Colombia Exploration Assets
The Company's exploration focus remains on the
At the Llanos-99 block, the Company completed the acquisition of 163 square kilometers of 3D seismic and is currently completing administrative closure of the project. The Company continues to progress pre-seismic and pre-drilling activities related to social and environmental studies in the Llanos-119, Llanos-99, CPE-6 and VIM-46 blocks.
Frontera's share of production in Ecuador for the three months ended June 30, 2023, was 613 bbl/d of medium crude oil compared to 1,005 bbl/d in the prior quarter.
At the Jandaya-1, Tui-1 and Yin-1 exploration wells, in the
At the Espejo block (Frontera 50% W.I. and non-operator), preliminary logging information indicated the presence of hydrocarbons in both the Pashuri-1 and Caracara-1 exploration wells and further analysis is underway. In addition, jointly with the operator, new 3D seismic survey data is being interpreted to define the location of the two remaining commitment exploration wells.
2. Midstream
Frontera has investments in certain infrastructure and midstream assets, including storage, port and other facilities in
Frontera's majority owned subsidiary Puerto Bahía and Refinería de Cartagena S.A.S. have entered into an agreement (the "Connection Agreement") to connect
The connection will be built, operated, and maintained by
Midstream Colombia Segment Results
The Company's Midstream Colombia Segment income increased by
For the three and six months ended
Three months ended | Six months ended | |||
($M) | 2023 | 2022 | 2023 | 2022 |
Revenue | 13,080 | 12,239 | 24,226 | 22,571 |
1,903 | 1,936 | 3,567 | 3,388 | |
Third party liquids port facility | 7,254 | 5,947 | 13,086 | 11,305 |
3,923 | 4,356 | 7,573 | 7,878 | |
Cost | (5,733) | (5,612) | (10,850) | (10,291) |
General administrative expenses | (1,455) | (1,082) | (2,797) | (2,753) |
Depletion, depreciation, and amortization | (1,319) | (1,563) | (2,551) | (3,039) |
Restructuring, severance, and other costs | (700) | (882) | (803) | (1,056) |
Puerto Bahia Income from operations | 3,873 | 3,100 | 7,255 | 5,432 |
Share of income from associates - ODL | 14,345 | 9,648 | 27,917 | 18,742 |
Segment income | 18,218 | 12,748 | 35,142 | 24,174 |
Segment cash flow from operations activities | 20,101 | 14,980 | 27,709 | 32,004 |
Three months ended | Six months ended | |||
($M) | 2023 | 2022 | 2023 | 2022 |
Adjusted Midstream Revenue (1) | 43,186 | 25,604 | 81,417 | 48,606 |
Adjusted Midstream Operating Cost (1) | (9,307) | (7,367) | (9,307) | (13,663) |
Adjusted Midstream General and administrative (1) | (2,803) | (1,885) | (5,117) | (4,197) |
Adjusted Midstream EBITDA | 30,361 | 16,352 | 57,951 | 30,071 |
1. Non-IFRS financial measure (equivalent to a "non-GAAP financial measure", as defined in NI 52-112). Refer to the "Non-IFRS and Other Financial Measures'' section. |
The Adjusted Midstream EBITDA for the three months ended
3. Guyana Exploration
During the quarter, Frontera and its Joint Venture partner CGX, announced a significant oil discovery at the Wei-1 well, located on the Corentyne block, approximately 200 kilometers offshore from
Following the safe and successful completion of Wei-1 well drilling operations, Frontera and CGX have entered into an agreement (the "JOA Amending Agreement") to amend the Joint Operating Agreement originally signed between a subsidiary of Frontera and CGX on
As part of the JOA Amending Agreement, CGX will transfer 4.7% of its participating interest in the Corentyne block to Frontera in exchange for Frontera funding CGX's additional expected outstanding share of the Joint Venture's costs associated with the Wei-1 well (the "CGX Corentyne Block Expenses") for up to
Hedging Update
As part of its risk management strategy, Frontera uses derivative commodity instruments to manage exposure to price volatility by hedging a portion of its oil production. Consistent with this strategy, the Company entered new put hedges totaling 2,096,000 bbls to protect a portion of the Company's production through
Term | Type of Instrument | Open (bbl/d) | Average Put/ Call |
July | Put | 13,548 | 70 |
August | Put | 13,548 | 70 |
September | Put | 14,000 | 70 |
3Q-2023 | Total Average | 13,696 | |
October | Put | 13,733 | 78.57 |
November | Put | 14,133 | 78.61 |
Oct/Nov-2023 | Total Average | 13,705 |
The Company is exposed to foreign currency fluctuations primarily arising from expenditures that are incurred in COP and its fluctuation against the USD. During the second quarter 2023, the Company recognized a gain of
Term | Type of Instrument | Open Interest | Strike Prices Put/Call | Hedging Ratio |
3Q-2023 | Zero-cost collars | 60 | 4,320/ 4,907 | 40 % |
4Q-2023 | Zero-cost collars | 60 | 4,320/4,914 | 40 % |
Second Quarter 2023 Financial Results Conference Call
A conference call for investors and analysts will be held on
Analysts and investors are invited to participate using the following dial-in numbers:
Participant Number (
Participant Number (Toll Free Colombia): 01-800-518-4036
Participant Number (International): 1-416-764-8650
RapidConnect URL https://emportal.ink/3NZNNJU
Conference ID: 29912947
Webcast Audio: www.fronteraenergy.ca
A replay of the conference call will be available until
Encore Toll free Dial-in Number: 1-888-390-0541
International Dial-in Number: 1-416-764-8677
Encore ID: 912947
About Frontera:
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Advisories:
Cautionary Note Concerning Forward-Looking Statements
This news release contains forward-looking information within the meaning of Canadian securities laws. Forward-looking information relates to activities, events, or developments that the Company believes, expects or anticipates will or may occur in the future. Forward-looking information in this news release includes, without limitation, statements regarding the Company's continued commitment to aligning its Upstream, Midstream and
Forward-looking information reflects the current expectations, assumptions and beliefs of the Company based on information currently available to it and considers the Company's experience and its perception of historical trends, including expectations and assumptions relating to commodity prices and interest and foreign exchange rates; the current and expected impacts of the COVID-19 pandemic, actions of the
Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be placed on such information. Forward-looking information is subject to a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to the Company. The actual results may differ materially from those expressed or implied by the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, the Company. The Company's annual information form dated
Non-IFRS Financial and Other Measures
This news release contains various "non-IFRS financial measures" (equivalent to "non-GAAP financial measures", as such term is defined in NI 52-112), "non-IFRS ratios" (equivalent to "non-GAAP ratios", as such term is defined in NI 52-112), "supplementary financial measures" (as such term is defined in NI 52-112), and "capital management measures" (as such term is defined in NI 52-112), which are described in further detail below. Such financial measures do not have standardized IFRS definitions. The Company's determination of these financial measures may differ from other reporting issuers, and they are therefore unlikely to be comparable to similar measures presented by other companies. Furthermore, these financial measures should not be considered in isolation or as a substitute for measures of performance or cash flows as prepared in accordance with IFRS. These financial measures do not replace or supersede any standardized measure under IFRS. Other companies in our industry may calculate these financial measures differently than we do, limiting their usefulness as comparative measures. The Company discloses these financial measures, together with measures prepared in accordance with IFRS, because management believes they provide useful information to investors and shareholders, as management uses them to evaluate the operating performance of the Company. These financial measures highlight trends in the Company's core business that may not otherwise be apparent when relying solely on IFRS financial measures. Further, management also uses non-IFRS measures to exclude the impact of certain expenses and income that management does not believe reflect the Company's underlying operating performance. The Company's management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period and to prepare annual operating budgets and as a measure of the Company's ability to finance its ongoing operations and obligations.
Set forth below is a description of the non-IFRS financial measures, non-IFRS ratios, supplementary financial measures and capital management measures used in this news release.
Operating EBITDA
EBITDA is a commonly used measure that adjusts net income as reported under IFRS to exclude the effects of income taxes, finance income and expenses, and depletion, depreciation and amortization expense. Operating EBITDA is a non-IFRS financial measure that represents the operating results of the Company's primary business, excluding the following items: restructuring, severance and other costs, post-termination obligation and payments of minimum work commitments and certain non-cash items (such as impairments, foreign exchange, unrealized risk management contracts and share-based compensation) and gains or losses arising from the disposal of capital assets. In addition, other unusual or non-recurring items are excluded from operating EBITDA, as they are not indicative of the underlying core operating performance of the Company. Since the three and six months ended
Three Months Ended | ||
($M) | 2023 | 2022 |
Net income (1) | 80,207 | 13,484 |
Finance Income | (1,472) | (876) |
Finance expenses | 15,688 | 12,621 |
Income tax expense | 2,605 | 91,065 |
Depletion, depreciation and amortization | 81,389 | 49,510 |
Expense of impairment, recovery of asset retirement obligation and others | (35,900) | 4,618 |
Post-termination obligation | 6,120 | 6,842 |
Shared-based compensation non-cash portion | 1,035 | (583) |
Restructuring, severance and other costs | 1,825 | 1,055 |
Share of income from associates | (14,345) | (9,648) |
Foreign exchange (income) loss | (17,006) | 13,080 |
Other loss | 716 | 5,062 |
Unrealized (gain) loss on risk management contracts | (4,057) | 1,797 |
Non-controlling interests | (344) | 2,651 |
Operating EBITDA | 116,461 | 190,678 |
(1) Refers to net income attributable to equity holders of the Company |
Capital Expenditures
Capital expenditures is a non-IFRS financial measure that reflects the cash and noncash items used by a company to invest in capital assets. This financial measure considers oil and gas properties, plant and equipment, infrastructure, exploration, and evaluation assets expenditures.
Three months ended | |||
($M) | 2023 | 2022 | |
Statements of Cash Flows | |||
Additions to Oil and Gas properties, infrastructure port and plant and equipment | 66,166 | 66,526 | |
Additions to exploration and evaluation assets | 88,924 | 31,302 | |
Total additions to Statements of Cash Flows | 155,090 | 97,828 | |
Non-cash Adjustments (1) | (230) | (3,993) | |
Total Capital Expenditures | 154,860 | 93,835 | |
Capital Expenditures attributable to Midstream Colombia Segment | 836 | 946 | |
Capital Expenditures attributable to other segments different to Midstream | 154,024 | 92,889 | |
Total Capital Expenditures | 154,860 | 93,835 |
(1) Related to material inventory movements, capitalized non-cash items and other adjustments. |
Operating Netback and Oil and Gas Sales, Net of Purchases
Operating netback is a non-IFRS financial measure and operating netback per boe is a non-IFRS ratio. Operating netback is used to assess the net margin of the Company's production after subtracting all costs associated with bringing one barrel of oil to the market. It is also commonly used by the oil and gas industry to analyze financial and operating performance expressed as profit per barrel and is an indicator of how efficient the Company is at extracting and selling its product. For netback purposes, the Company removes the effects of any trading activities and results from its midstream segment from the per barrel metrics. Refer to the "Operating Netback and Oil and Gas Sales, Net of Purchases" section on pages 21 and 22 of the Interim MD&A for a description of each component of the Company's operating netback and how it is calculated. Oil and gas sales, net of purchases, is a non-IFRS ratio that is calculated using oil and gas sales less the cost of volumes purchased from third parties including its transportation and refining cost, divided by the total sales volumes from D&P assets, net of purchases.
Three months ended | ||
2023 | 2022 | |
Produced crude oil and gas sales ($M) (1) | 227,918 | 316,480 |
Purchased crude oil and products sales ($M) | 59,902 | 47,968 |
(-) Cost of purchases ($M) (2) | (66,602) | (53,195) |
Oil and gas sales, net of purchases ($M) | 221,218 | 311,253 |
Sales volumes, net of purchases – (boe) | 3,257,709 | 3,027,843 |
Oil and gas sales, net of purchases ($/boe) | 67.91 | 102.80 |
(1) Excludes sales from port services as they are not part of the oil and gas segment. For further information, refer to the "Midstream Colombia" section. |
(2) Cost of third-party volumes purchased for use and resale in the Company's oil operations, including its transportation and refining costs. |
Net sales is a non-IFRS financial measure that adjusts revenue to include realized gains and losses from risk management contracts while removing the cost of other dilution activities. This is a useful indicator for management as the Company hedges a portion of its oil production using derivative instruments to manage exposure to oil price volatility. This metric allows the Company to report its realized net sales after factoring in these risk management activities. The deduction for other dilution costs and cost of purchases is helpful to understand the Company's sales performance based on the net realized proceeds from production net of dilution, the cost of which is partially recovered when the blended product is sold. Net sales also exclude sales from port services, as it is not considered part of the oil & gas segment.
Midstream Colombia Calculations
Each of Midstream Revenue, Midstream Operating Cost and Midstream General and Administrative is a non-IFRS financial measure, and each is used to evaluate the performance of the Midstream Colombia Segment's operations. Midstream Revenue includes revenues of the Midstream Colombia Segment including ODL's revenue direct participation interest. Midstream Operating Cost includes costs of Midstream Colombia Segment including ODL's cost direct participation interest. Midstream General and Administrative includes general and administrative costs of the Midstream Colombia Segment including ODL's general and administrative direct participation interest. Midstream Cash and Midstream Debt is a non-IFRS financial measure or contains a non-IFRS financial measure and is used to evaluate the performance of the Midstream Colombia Segment's cash position and monitor the Midstream Colombia Segment's debt. Midstream Cash includes cash of Midstream Colombia Segment including ODL's cash direct participation interest. Midstream Debt includes debt of the Midstream Colombia Segment including ODL's debt direct participation interest. Midstream EBITDA is a non-IFRS financial measure used to assist in measuring the operating results of the Midstream Colombia Segment business.
Three months ended | ||
($M)(1) | 2023 | 2022 |
Revenue Midstream Colombia Segment | 13,080 | 12,239 |
Revenue from ODL | 86,017 | 63,715 |
Direct participating interest in the ODL | 35.00 % | 20.98 % |
Equity adjustment participation of ODL(1) | 30,106 | 13,367 |
Adjusted Midstream Revenues | 43,186 | 25,606 |
Operating Cost Midstream Colombia Segment | (5,733) | (5,612) |
Operating Cost from ODL | (10,212) | (8,366) |
Direct participating interest in the ODL | 35.00 % | 20.98 % |
Equity adjustment participation of ODL(1) | (3,574) | (1,755) |
Adjusted Midstream Operating Cost | (9,307) | (7,367) |
General and Administrative Midstream Colombia Segment | (1,455) | (1,082) |
General and administrative from ODL | (3,850) | (3,826) |
Direct participating interest in the ODL | 35.00 % | 20.98 % |
Equity adjustment participation of ODL(1) | (1,348) | (803) |
Adjusted Midstream General and Administrative | (2,803) | (1,885) |
(1) Revenues and expenses related to the ODL are accounted for using the equity method described in the Note 12 of the Interim Financial Statements |
Net Sales Realized Price
Net sales realized price is a non-IFRS ratio that is calculated using net sales (including oil and gas sales net of purchases, realized gains and losses from risk management contracts less royalties and other dilution costs). Net sales realized price per boe is a non-IFRS ratio which is calculated dividing each component by total sales volumes, net of purchases.
Three months ended | ||
2023 | 2022 | |
Oil and gas sales, net of purchases ($M) (1) | 221,218 | 311,253 |
(-) Realized loss on risk management contracts ($M) | (2,600) | (3,476) |
(-) Royalties ($M) (2) | (9,837) | (32,018) |
208,781 | 275,759 | |
Sales volumes, net of purchases – (boe) | 3,257,709 | 3,027,843 |
Oil and gas sales, net of purchases ($/boe) | 67.91 | 102.80 |
Realized loss on risk management contracts ($/boe) (2) | (0.80) | (1.15) |
Royalties ($/boe) | (3.02) | (10.57) |
Net sales realized price ($/boe) | 64.09 | 91.08 |
(1) Non-IFRS financial measure |
(2) Supplementary financial measure |
Production cost per boe
Production costs mainly includes lifting costs, activities developed in the blocks, and processes to put the crude oil and gas in sales condition. Production cost per boe is a supplementary financial measure that is calculated using production cost divided by production (before royalties). A reconciliation of this calculation is provided below:
Three months ended | ||
2023 | 2022 | |
Production costs ($M) | 53,615 | 47,335 |
Production (boe) | 3,826,459 | 3,784,235 |
Production costs ($/boe) | 14.01 | 12.51 |
Transportation cost per boe
Transportation costs includes all commercial and logistics costs associated with the sale of produced crude oil and gas such as trucking and pipeline. Transportation cost per boe is a supplementary financial measure that is calculated using transportation cost divided by net production after royalties. A reconciliation of this calculation is provided below:
Three months ended | ||
2023 | 2022 | |
Transportation costs ($M) | 39,130 | 35,065 |
Net Production (boe) | 3,431,246 | 3,246,607 |
Transportation costs ($/boe) | 11.40 | 10.80 |
Realized gain (loss) on risk management contracts per boe
Realized gain (loss) on risk management contracts includes the gain or loss during the period, as a result of the Company's exposure in derivative contracts. Realized gain (loss) on risk management contracts per boe is a supplementary financial measure that is calculated using Realized gain (loss) on risk management contracts divided by total sales volumes, net of purchases.
Working Capital
Working capital is a capital management measure to describe the liquidity position and ability to meet its short-term liabilities. Working Capital is defined as current assets less current liabilities.
Restricted cash short and long-term
Restricted cash (short and long term) is a capital management measure, that sum the short-term portion and long-term portion of the cash that the Company has in term deposits that have been escrowed to cover future commitments and future abandonment obligations or insurance collateral for certain contingencies and other matters that are not available for immediate disbursement.
Total cash
Total cash is a capital management measure to describe the total cash and cash equivalents restricted and unrestricted available and consists of the cash and cash equivalents and the restricted cash short and long-term.
Total debt and lease liabilities
Total debt and lease liabilities are capital management measures to describe the total financial liabilities of the Company, and comprises the debt of unsecured notes, loans and liabilities from leases of various properties, power generation supply, vehicles and other assets.
Oil and Gas Information Advisories
This news release includes terms and phrases such as "hydrocarbon-bearing intervals" and "presence of hydrocarbons". Such terms and phrases should not be interpreted to mean there is any level of certainty in regards to the volume of oil, natural gas or condensates present therein, or that such volumes may be produced profitably or in commercial quantities.
Reported production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this news release due to, among other factors, difficulties or interruptions encountered during the production of hydrocarbons.
The term "boe" is used in this news release. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of cubic feet to barrels is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In this news release, boe has been expressed using the Colombian conversion standard of 5.7 Mcf: 1 bbl required by the
Definitions:
bbl(s) | Barrel(s) of oil |
bbl/d | Barrels of oil per day |
boe | Refer to "Boe Conversion" disclosure above |
boe/d | Barrel of oil equivalent per day |
Mcf | Thousand cubic feet |
W.I. | Working Interest |
Net Production | Net production represents the Company's working interest volumes, net of royalties and |
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