In response to COVID-19 and excess global oil supply…

Mar 29, 2020 News

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Frontera Energy slashes more than 50% of 2020 capital plan, accelerates cost-saving initiatives

CGX Resources’ partner on the Corentyne and Demerara blocks offshore Guyana has announced that it will be taking several measures in response to the low oil price environment caused by excess global supply and the COVID-19 pandemic.
Kaieteur News understands that the Canadian company will be reducing its 2020 capital plan by more than 50 percent. It will also be accelerating its cost savings initiatives.
With respect to the latter, and in an effort to streamline the organization, including the executive team, Frontera noted that Mr. David Dyck is stepping down as Chief Financial Officer (CFO), effective March 31, 2020. The company noted that Mr. Dyck will remain with the company for an interim period to assist with transitional matters. On April 1, 2020, Alejandro Piñeros, who currently serves as Corporate Vice-President of Strategy and Planning, will become Frontera’s Chief Financial Officer.
In relation to the overall health of the company, Gabriel de Alba, Chairman of the Board of Directors, was keen to note that Frontera is taking swift and decisive measures to protect its people, balance sheet and cash flow, in order to best position itself when it emerges from the current environment. Alba added, “By virtue of our strong capital discipline, we started this year with a robust cash position, which we are protecting through reduced capital expenditures, additional savings and efficiency improvements, thus managing the risk of an extended period of weaker commodity prices.”
Further to this, the Chairman said that Frontera is implementing various initiatives to reduce capital costs and streamline the organization. It is in this context he explained that David Dyck is stepping down as Chief Financial Officer. Alba said, “I have had the pleasure of working with David over the past two years and would like to personally thank him for his great efforts and support as we have continued with Frontera’s transformation. On behalf of the Board, I welcome Alejandro Piñeros to the role of CFO. I have worked closely with Alejandro, and I am confident his deep expertise and familiarity with the business will be a tremendous asset during these important times.”
As for Richard Herbert, Frontera’s Chief Executive Officer (CEO), he was quick to note that the team’s accelerated actions to significantly reduce planned capital expenditures in 2020 and identify further opportunities to decrease operating expenditures across its production portfolio, is a decision that was necessary and one to be proud of. As a first step, Herbert said that planned 2020 capital expenditures are being reduced by around 60%, focusing on activities that generate positive cash returns at current oil prices.
The CEO further stated that Frontera’s investment priorities will be essential well workovers and critical maintenance until market conditions improve and prices have recovered. Herbert also noted that Frontera is absolutely committed to maintaining its focus on health, safety and the environment. The CEO added, “We continue to monitor the rapidly changing COVID-19 outbreak. We have internal protocols and procedures in place and are following national health guidelines to ensure the safety and well-being of our employees in our fields and offices.”
REVISED CAPITAL PLAN/ OTHER INITIATIVES
Kaieteur News understands that the Company is currently reducing planned 2020 capital expenditures by around 60% to a range of CAD$130 to CAD$150 million. Those expenditures will be primarily focused on development and maintenance activities in the company’s core assets as well as its light and medium oil business unit in Colombia.
Consistent with the company’s long-time focus on disciplined investing, Executives noted that this revised capital plan has been developed with the goal of optimizing production while maximizing the cash balances of the Company during this period of lower oil prices. They said that the company will remain flexible with respect to capital allocation as events unfold in the coming months.
Furthermore, it is expected that these changes, the revised average annual production in 2020 will be in the range of 55,000 to 60,000 barrels of oil equivalent resource per day, a decrease of only 8% compared to 2020 guidance despite the significant decrease in capital expenditures. The company said it has deliberately shut-in a number of wells that are not economic to operate at current prices and will monitor operations continuously to optimize cash generation.
In addition to this, Frontera officials said they are actively working to reduce production and transportation and will provide further information on the results of those initiatives as the financial goals are achieved.

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