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Msg  13202 of 13261  at  3/3/2021 9:29:51 PM  by

The Red


Frontera Announces 2020 Year End Reserves

 Thank you for including net reserve estimates.  The price deck is super conservative. -TR
 
 

News Release Issued: Mar 3, 2021 (8:39pm EST)

To view this release online and get more information about Frontera Energy visit: https://fronteraenergy.mediaroom.com/2021-03-03-Frontera-Announces-2020-Year-End-Reserves

Frontera Announces 2020 Year End Reserves

Achieved 191% Net 2P Reserves Replacement Ratio in Colombia

Extended Net 2P Reserves Life Index to 10.6 years in Colombia

2P Reserves Net Present Value (10% discount) of $1.888 billion Before Tax

Added 18.9 MMboe Net 2P reserves from Colombia fields

TORONTO, March 3, 2021 /CNW/ - Frontera Energy Corporation (TSX: FEC) ("Frontera" or the "Company") 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.

Richard Herbert, Chief Executive Officer, commented:

"In 2020, Frontera safely and efficiently added 30.6 MMboe Proved plus Probable ("2P") reserves including 6.4 MMboe from the exciting La Belleza discovery in the VIM-1 block. These strong reserves additions combined with reduced production resulted in 2P reserves replacement of 154% and extended Frontera's Reserve Life Index to 10.3 years based on 2020 production. These results are a credit to the perseverance of our entire team given the difficult backdrop of COVID-19 induced restrictions and challenges, decreased capital spending that focused on our highest return production, limited exploration and development drilling and a significant decrease in oil prices during the year."

Frontera's 2020 year-end 2P reserves additions of 30.6 MMboe were significantly driven by the La Belleza discovery in the VIM-1 block, reduction of in-kind royalty payments and reduction in high price participation (PAP) royalties related to the Quifa block and technical revisions. These additions were offset by 16.1 MMboe of 2020 production and the de-booking of 5.7 MMboe of reserves in Blocks 192 and Z-1 in Peru, and the Orito field in Colombia as Frontera pursues its exit from these areas. All of the Company's booked reserves for the year ended December 31, 2020 are located in Colombia.

2020 Reserves Report Highlights:

For the year ended December 31, 2020 the Company:

  • Added 18.9 MMboe of 2P reserves from its Colombia fields including Coralillo, Quifa SW, Hamaca, Jaspe, Ceibo and Copa.

  • Added 6.4 MMBoe of 2P reserves and 17.5 MMBoe of Proved plus Probable plus Possible ("3P") reserves from the exciting La Belleza gas condensate discovery.

  • Added 24.8 MMboe of 2P reserves on a net basis, increasing the Company's 2P net reserves to 166.4 MMboe, compared to 157.7 MMboe at December 31, 2019, an increase of 5.5%.

  • Achieved a net 2P Reserve Replacement Ratio of 154% compared to 112% at December 31, 2019.

  • Extended 2P reserves life index to 10.3 years compared to 6.7 years at December 31, 2019.

  • Increased net 3P reserves by 14.6 MMboe to 221.8 MMboe, an increase of 7%, compared to 207.2 MMboe at December 31, 2019.

  • Achieved a finding and development ("F&D") cost of $3.38/boe in 2020 on a 2P basis ($11.53/boe in 2019) in Colombia with upstream reserves based capital expenditures of $101 million ($289 million in 2019) not including changes in future development costs ("FDC"). 1P F&D cost was $7.38/boe ($11.32/boe in 2019). F&D reductions in 2020 are due to reductions associated with future development cost, operating expenses and development plan optimizations.

  • 2P reserves are comprised of 66% heavy oil, 30% light and medium oil and 4% natural gas.

  • Increased 2P reserves on a gross working interest basis before royalties, by 2% to 174.0 MMboe compared to 171.2 MMboe at December 31, 2019. Increased 3P reserves on a gross working interest basis before royalties, by 3% in 2020 to 230.4 MMboe compared to 222.7 MMboe at December 31, 2019.

  • The Net Present Value ("NPV") for the net 2P reserves, discounted at 10% before tax, is $1.888 billion at December 31, 2020, compared to $2.514 billion at December 31, 2019. The decrease in NPV for the 2P reserves is primarily due to lower commodity prices at December 31, 2020. See the Net Present Value After Tax summary table below for more information.

Colombia Reserves Update

In Colombia, the Company added 30.6 MMBoe of net 2P reserves significantly driven by 6.4 MMboe from the La Belleza discovery in the VIM-1 block, reduction of in-kind royalty payments, and reduction in high price participation (PAP) royalties related to the Quifa block and technical revisions of 18.9 MMboe from its Colombian fields including the Coralillo, Quifa SW, Hamaca, Jaspe, Ceibo and Copa fields. These additions were offset by 15.7 MMboe of 2020 production and the de-booking of the Orito field in Colombia. The Company achieved a 191% net 2P Reserves Replacement Ratio in Colombia.

In the VIM-1 block (Frontera 50% W.I. and Parex (Operator), 50% W.I.), the Company added 6.4 MMBoe of 2P reserves and 17.5 MMBoe of "3P" reserves from the exciting La Belleza gas condensate discovery. Based on the Company's 3P estimates, Frontera believes there is significant upside potential in the reserves, which may be unlocked as the field is developed.

Frontera's reserves evaluation is based upon the Company's assessment of the reservoir and fluid data obtained from the La Belleza-1 well, combined with the Company's mapping of the 3D seismic data over the field. This volumetric method of reserves estimation is one commonly used in the industry at this stage of evaluation. The joint venture expects to execute additional testing in 2021 to appraise the potential upside of the discovery and to gather more information to guide development plans for the field. The joint venture also plans to drill two exploration wells on the VIM-1 block in 2021 near La Belleza, on the Basilea and Planadas prospects. Frontera is excited about the upside potential of the La Belleza discovery and additional VIM-1 block exploration potential.

For the year ended December 31, 2020, the Company's reserves were independently 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) ("COGEH") and National Instrument 51-101 Standards for Disclosure of Oil and Gas Activities ("NI 51-101") and are based on the Company's 2020 year-end estimated reserves as evaluated by D&M in their reserves report dated February 18, 2021 with an effective date of December 31, 2020 (the "Reserves Report"). Additional reserve information as required under NI 51-101 will be included in the Company's NI 51-101F1 Form which is expected to be filed on SEDAR on March 3, 2021. See "Advisory Note Regarding Oil and Gas Information" section in the "Advisories", at the end of this news release. Numbers in tables may not add due to rounding differences.

2020 Year-End D&M Certified Gross Reserves Volumes(1)

Reserves Category

December 31, 2020

December 31, 2019

Percentage Change
2020 versus 2019


MBoe (2)

MBoe (2)


Proved Developed Producing (PDP)

27,301

40,285

(32)%

Proved Developed Not Producing (PDNP)

10,015

4,259

135%

Proved Undeveloped (PUD)

70,685

70,857

(0)%

Total Proved (1P)

108,001

115,401

(6)%

Probable

64,017

55,789

18%

Total Proved Plus Probable (2P)

174,018

171,190

2%

Possible (3)

56,378

51,544

(9)%

Total Proved Plus Probable Plus Possible (3P)

230,396

222,734

(3)%

(1) Gross reserves represent Frontera's WI 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.

2020 Year-End D&M Certified Net Reserves Volumes(1)

Reserves Category

December 31, 2020
Mboe (2)

December 31, 2019
Mboe (2)

Percentage Change
2020 versus 2019

Proved Developed Producing (PDP)

25,955

37,050

(30)%

Proved Developed Not Producing (PDNP)

9,395

3,948

138%

Proved Undeveloped (PUD)

66,845

63,757

5%

Total Proved (1P)

102,195

104,755

(2)%

Probable

64,203

52,932

21%

Total Proved Plus Probable (2P)

166,399

157,687

6%

Possible (3)

55,420

49,546

(12)%

Total Proved Plus Probable Plus Possible (3P)

221,818

207,233

7%

(1) Net reserves represent Frontera's WI 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 December 31, 2020 as applied in the Reserves Report. The Company's net reserves after royalties at December 31, 2020 incorporate all applicable royalties under Colombia fiscal legislation 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 blocks, as at year-end 2020.

2020 Year-End D&M Certified Reserves Volumes by Product Type and Country(6)

Reserves at December 31, 2020 (MMboe) (1)(5)

Country

Field

Proved (1P)

Probable

Proved plus
Probable (2P)

Hydrocarbon Type

Gross

Net

Gross

Net

Gross

Net


Colombia

Quifa SW Block

49.9

46.1

7.6

6.8

57.5

52.9

Heavy Oil

Other heavy oil blocks (2)

29.8

29.0

28.4

28.1

58.2

57.1

Heavy Oil

Light/medium oil blocks (3)

24.9

23.7

24.2

23.4

49.1

47.1

Light and medium oil and associated natural gas

Natural gas blocks (4)

3.4

3.4

5.9

5.9

9.3

9.3

Natural gas and associated liquids

Total December 31, 2020

108.0

102.2

66.0

64.2

174.0

166.4

Oil and natural gas


Total December 31, 2019

115.4

104.8

55.8

52.9

171.2

157.7



Difference

(7.4)

(2.6)

10.2

11.3

2.8

8.7



2020 Production

17.4

16.1

Total Reserves
Incorporated

20.2

24.8


(1) See "Boe Conversion" section in the "Advisories", at the end of this press release.

(2) Includes Cajua and Jaspe field in Quifa Block and Sabanero, and CPE-6 blocks.

(3) Includes Cubiro, Cravoviejo, Canaguaro, Guatiquia, Casimena, Corcel, Neiva, Cachicamo, Guaduas and other producing blocks.

(4) Includes La Creciente and VIM 1 blocks.

(5) Gross refers to Frontera's WI before royalties. Net refers to Frontera's WI after royalties.

(6) All of the Company's booked reserves are located in Colombia

2020 2P Reserves Reconciliation


Oil Equivalent Gross 2P
Reserves (MMboe) (1)(2)

Oil Equivalent Net 2P
Reserves (MMboe) (1)(2)

December 31, 2019

171.2

157.7

Net Additions (3)

10.8

10.5

Economic and Technical Revisions (4) (4)

15.6

20.1

Dispositions(6)

(6.2)

(5.7)

Production (5)

(17.4)

(16.1)

December 31, 2020

174.0

166.4

(1) See "Boe Conversion" section in the "Advisories", at the end of this press release.

(2) Gross refers to Frontera's WI before royalties. Net refers to Frontera's WI after royalties.

(3) Includes discoveries (La Belleza field (VIM 1 Block in Colombia), extensions and improved recoveries (including improved recoveries of Coralillo and Copa fields (Guatiquia and Cubiro blocks in Colombia).

(4) Net reconciliation is higher than gross, by the positive impact of the reduction of in-kind royalty payments and reduction in high price participation (PAP) royalties related to the Quifa block

(5) Production represents the production for the twelve-month period ended December 31, 2020 for assets with associated reserves. Production associated with exploration and evaluation assets are included in production volumes for financial reporting purposes.

(6) Includes Blocks 192 and Z-1 in Peru, and the Orito field in Colombia.

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

($/bbl)

2021

2022

2023

2024

2025

Brent Oil Price Forecast 2020

67.94

70.06

71.66

73.27

74.57

Brent Oil Price Forecast 2021

49.42

52.85

56.04

57.87

59.00

(1) The reserves report used the average Brent projected price of three major international independent auditors: GLJ Petroleum Consultants, McDaniel and Associates Consultants and Sproule Consultants. The 2020 price forecast reflects prices used in the December 31, 2019 reserves report and the 2021 price forecast reflects prices used in the December 31, 2020 reserves report.

Colombia Reserve Life Index ("RLI")(1)

($/bbl)

December 31, 2019(2)

December 31, 2020(3)

Total Proved (1P)

4.9 years

6.5 years

Total Proved Plus Probable (2P)

7.2 years

10.6 years

Total Proved Plus Probable Plus Possible (3P)

9.3 years

14.1 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 for Colombia by the 2019 Colombia average daily production of 21.2 MMboe.

(3) Calculated by dividing the total relevant net reserves category for Colombia by the 2020 Colombia average daily production of 15.7 MMboe.

Net Present Value Before Tax Summary - D&M Reserves Report (2021 Brent Forecast)(1)(2)

Reserves Category

December 31, 2019

December 31, 2020

December 31, 2020

$ (000's), except per share data

NPV10 ($ 000's)(3)

NPV10 ($ 000's)(4)

NPV10 (C$/share)(5)

Proved Developed Producing (PDP)

844,515

367,237

4.80

Proved Developed Not Producing (PDNP)

72,282

153,073

2.00

Proved Undeveloped

809,323

594,355

7.76

Total Proved (1P)

1,726,120

1,114,666

14.56

Probable

788,289

773,015

10.10

Total Proved Plus Probable (2P)

2,514,409

1,887,681

24.65

Possible (6)

875,175

669,312

8.74

Total Proved Plus Probable Plus Possible (3P)

3,389,584

2,556,993

33.40

(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 Petroleum Consultants, McDaniel and Associates Consultants and Sproule Consultants.. The January 1, 2021 price forecast will be included in the Company's NI 51-101F1 disclosure for 2020.

(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 December 31, 2019 of $1,173 million for 1P and $1,773 million for 2P.

(4) Includes FDC as at December 31, 2020 of $808 million for 1P and $1,309 million for 2P.

(5) Calculated by dividing the December 31, 2020 NPV10 value by 97,466,224 shares outstanding as at December 31, 2020 and a USD:CAD foreign exchange rate of 1.28:1. Per share valuations do not consider any value attributed 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).

(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.

Net Present Value After Tax Summary - D&M Reserves Report (2021 Brent Forecast)(1)(2)

Reserves Category

December 31, 2019

December 31, 2020

December 31, 2020

$ (000's), except per share data

NPV10 ($ 000's)(3)

NPV10 ($ 000's)(4)

NPV10 (C$/share)(5)

Proved Developed Producing (PDP)

758,397

344,170

4.50

Proved Developed Not Producing (PDNP)

64,842

143,415

1.87

Proved Undeveloped

725,158

556,317

7.27

Total Proved (1P)

1,548,397

1,043,903

13.63

Probable

570,464

522,958

6.83

Total Proved Plus Probable (2P)

2,118,861

1,566,860

20.46

Possible (6)

623,339

451,961

5.90

Total Proved Plus Probable Plus Possible (3P)

2,742,200

2,018,822

26.37

(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 Petroleum Consultants, McDaniel and Associates Consultants and Sproule Consultants. The full January 1, 2021 price forecast will be included in the Company's NI 51-101F1 disclosure for 2020.

(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 December 31, 2019 of $1,173 million for 1P

(4) $1,773 million for 2P and FDC as at December 31, 2020 of $808 million for 1P and $1,309 million for 2P.

(5) Calculated by dividing the December 31, 2020 NPV10 value by 97,466,224 shares outstanding as at December 31, 2020 and a USD:CAD foreign exchange rate of 1.28:1. Per share valuations do not consider any value attributed 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).

(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.

Calculation of 2020 Reserve Metrics - Colombia Net


Proved (1P)

Proved Plus Probable (2P)

Capital Expenditures ($ 000's)(1)

101,132

101,132

Reserve Additions (000's boe)(2)

13,702

29,954

F&D Costs ($/boe)(3)

7.4

3.4

(1) Calculated using actual capital expenditures as at December 31, 2020.

(2) Net reserves addition in Colombia.

(3) The aggregate of the exploration and development costs incurred in the most recent financial year generally will not reflect total F&D costs related to reserves additions for that year. F&D costs are calculated as capital expenditures divided by reserve additions for F&D Costs ($/boe). F&D costs 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.

Future Development Costs (FDC) - Using D&M Forecast Prices and Costs (1)

Colombia ($ 000's)

Total Proved (1P)

Total Proved Plus Probable (2P)

2021

72,788

107,408

2022

151,427

216,736

2023

116,884

202,901

2024

161,859

218,228

2025

140,969

179,144

Beyond 2025

164,447

385,062

Total undiscounted

808,374

1,309,479

About Frontera:

Frontera Energy Corporation is a Canadian public company involved in the exploration, development, production, transportation, storage and sale of oil and natural gas in South America, including related investments in both upstream and midstream facilities. The Company has a diversified portfolio of assets with interests in 40 exploration and production blocks in Colombia, Ecuador and Guyana, and pipeline and port facilities in Colombia. Frontera is committed to conducting business safely and in a socially, environmentally and ethically responsible manner. Frontera's common shares trade on the Toronto Stock Exchange under the ticker symbol "FEC".

If you would like to receive News Releases via e-mail as soon as they are published, please subscribe here:
http://fronteraenergy.mediaroom.com/subscribe

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