Canadian oil company Frontera Energy (TSX: FEC) posted net income of $45.1 million USD in the third quarter, a turnaround from its net loss of $141.1 million USD in the third quarter of 2017 and net loss of $184.4 million USD last quarter.
“Frontera performed well in the third quarter, generating significant cash flow and further strengthening our balance sheet in spite of production interruptions,” said Richard Herbert, chief executive officer of Frontera Energy.
Importantly, the Toronto-based company’s oil-price hedges have now expired, and it believes that this will be a boon for future earnings as it tries to further move beyond its most trying financial times of the past few years.
“While a necessary risk management strategy during the company’s restructuring in 2016, they have limited our ability to benefit from rising oil prices this year,” said Herbert. “Without a cap on our realized prices for the last two months of this year, we expect our exposure to Brent oil prices to increase by nearly $12 per barrel, based on recent prices, directly benefiting Frontera’s earnings and cash flow.”
The company is also optimistic about increasing its output. Frontera Energy noted that production has now risen to 65,000 barrels per day at the tail end of the quarter, and this figure is “expected to grow throughout the fourth quarter,” particularly in Colombia with the “startup of the first phase of the water-handling expansion project at Quifa SW on October 30, 2018.” This project will lift net production by up to 3,000 barrels per day, said the company in a statement.
Frontera Energy is also “making progress securing Frontera’s growth with the discovery at Acorazado-1,” which is the firm’s fourth successful exploration effort in Colombia in 2018. It expects to start a long term-test at the site before the end of the year, added Herbert.
“We have continued to accelerate our drilling activities within our existing portfolio,” said Herbert. “During the fourth quarter we expect to drill 36 wells, with 22 development wells at Quifa SW, seven water injection wells, two light and medium oil development wells on the Guatiquia block, two development wells at Zopilote Sur on the Cravo Viejo block, and three exploration and appraisal wells.”
Its Block 192 in Peru, which experienced a force majeure event on the NorPeruano pipeline, was also “restarted in early September, has consistently produced over 9,500 barrels per day since coming back on stream,” according to Frontera Energy.