NEWSROOM

Orlando Cabrales Segovia Appointment as CEO Brings Colombian Management Leadership and Deep Regional Relationships

2021 Strategic Plan Focused On:

• Value-Driven Production from Frontera's Sustainable Colombian Operations
• Exploration Portfolio in Guyana and Colombia
• Company Also Intends to Implement Normal Course Issuer Bid

TORONTO, March 3, 2021 /CNW/ - Frontera Energy Corporation (TSX: FEC) ("Frontera" or the "Company") today announced the appointment of current director Orlando Cabrales Segovia as Chief Executive Officer. The Company also provided an update on its 2021 Strategic Plan, including its growth opportunity in Guyana, its full year 2021 guidance, and its plans to implement a normal course issuer bid ("NCIB"). All values in this news release and the Company's financial disclosures are in United States dollars, unless otherwise noted.

Strategic Update

• CEO succession brings Colombian management leadership and deep regional relationships.
• Delivering value-focused production, cash flow, and reserves from Frontera's strong Colombian operations including substantial development activities in the CPE-6 field.
• Reinforcing Frontera's focus on continuous operational improvements and greater cost efficiencies.
• Advancing its exciting exploration portfolio, including drilling the Kawa-1 well in the Corentyne block, offshore Guyana and building on the success of the La Belleza discovery in Colombia.
• Hedges in place to support capital program.
• Frontera intends to implement a NCIB for up to 5,197,612 of its common shares subject to approval of the Toronto Stock Exchange (TSX).

Capital and Production Guidance Summary

• 2021 capital expenditures of approximately $200-$295 million on a consolidated basis, focused on four key areas:

1. Colombia Development – $110-$130 million in development capital focused on the Company's strong Colombian base.
2. Colombia & Ecuador Exploration –$30-40 million to drill two exploration wells in the VIM-1 block in 2021; and to complete seismic and preparatory work in Ecuador in advance of potential drilling in 2022.
3. Guyana Exploration – $40-90 million in total principally for the Kawa-1 exploration well on the Corentyne block, a world-class offshore oil opportunity, during the second half of 2021.
4. Guyana Infrastructure – $15-25 million for Berbice Port construction.

• Forecasting full year Colombian production of 40,500 - 42,500 boe/d and 2021 exit production of approximately 43,000 boe/d.
• Anticipating operating EBITDA of $275-$325 million.

CEO Succession

The Company announces the appointment of Board Member Orlando Cabrales Segovia as Chief Executive Officer, effective March 15, 2021, replacing Richard Herbert who has served as Chief Executive Officer for the last three years. The appointment of Mr. Cabrales reflects the significant progress that the Company has made to shape its operations as a focused Colombian producer with strong local partnerships, significant regional exploration projects, and material infrastructure assets serving the broader industry and communities. After March 15^th Mr. Herbert will continue acting in an advisory capacity to ensure an orderly transition with a focus on Guyana.  

Gabriel de Alba, Chairman of the Board of Directors, commented:

"As Frontera enters the next stage in its evolution, the Board sought a leader with the deep Colombian-based leadership experience, extraordinary reputation and relationships, and the ability to forge strategic partnerships with international oil and gas and infrastructure companies. The Board believes that Orlando brings these strengths and many others, which will help realize Frontera's full value potential. We are extremely proud of the advances this Company has already made over the past three years to right-size itself, relentlessly drive down costs, and create an operating culture that has been recognized this year as one of the world's most ethical. Frontera is a company with significant value across its assets and we look forward to the contributions of our leadership team as we execute our plan for 2021."

Orlando Cabrales, incoming Chief Executive Officer, Frontera commented:

"Since the new Frontera emerged in November 2016, the Company has made tremendous progress. The team has improved the Company's performance and reputation, exited underperforming assets and agreements, driven down costs, and maintained a strong production and financial profile throughout this transformation.

Today, Frontera is a more streamlined business with a sustainable portfolio of value-producing assets in Colombia and a highly prospective exploration portfolio in Guyana, Colombia and Ecuador. Combined with a relentless focus on operational efficiency, our goal is to create maximum value for shareholders. Our 2021 plan has been developed with these strategic goals in mind. I very much look forward to being a direct part of the management team in the next exciting phase of Frontera."

Mr. Cabrales joined Frontera's Board of Directors in November 2018 and has over 30 years of experience in the public and private energy sector in Colombia, including serving as Vice Minister of Energy of the Ministry of Mines and Energy in Colombia between 2013 and 2014 and as the President of the ANH from 2011 to 2013. Mr. Cabrales held senior roles at BP in Latin America and has been on the boards of numerous companies in Colombia including Isagen S.A., Tuscany Drilling, Cenit and ISA. Mr. Cabrales earned an undergraduate degree in Law from Pontifical Javeriana University and a Master's degree in Philosophy from Boston College. Concurrent with his appointment as CEO, Mr. Cabrales will continue as a director of Frontera.

Richard Herbert, Chief Executive Officer, Frontera commented:

"I am very pleased to pass the leadership baton to Orlando, who I have known for many years and deeply respect. I have every confidence that the future prospects for Frontera under his leadership are bright. I look back upon the achievements of the Frontera leadership team, supported by our Board, over the past three years since I became CEO with genuine pride. We have enhanced the culture of Frontera as evidenced by its improved health and safety performance and ethical reputation; Colombian upstream operations have been transformed by reducing costs and focusing on value over volumes; and the acquisition of CGX and joint venture interests in key exploration blocks including the Corentyne and Demerara blocks offshore Guyana, the VIM-1 block in the Lower Magdalena Valley, Colombia and exploration blocks in Ecuador has given Frontera a strong portfolio of renewal options for the future. I wish Orlando every success in taking Frontera forward in the next phase of its development."

Gabriel de Alba, Chairman of the Board, commented:

"Both personally and on behalf of the Board, I want to thank Richard for all that has been achieved on his watch as CEO. Great progress has been made over the past three years, and Frontera has many great opportunities before it."

Enhancing Shareholder Returns

Frontera also announced today that the Company intends to file with the TSX a notice of intention to commence a normal course issuer bid for its Common Shares (the "NCIB"). If accepted by the TSX, the Company would be permitted under the NCIB to purchase, during a 12-month period, up to 5,197,612 Common Shares, representing approximately 10% of the Company's "public float" (as calculated in accordance with TSX rules). The NCIB will be made in accordance with the rules of the TSX through the facilities of the TSX or alternative trading systems, if eligible. Frontera believes that, from time to time, the market price of its Common Shares may not fully reflect the underlying value of its business and future prospects and financial position. In such circumstances, Frontera may purchase for cancellation outstanding Common Shares, thereby benefitting all shareholders by increasing the underlying value of the remaining Common Shares. At the present time, the Board believes that an NCIB is a more effective way to deliver value to shareholders when compared to cash dividends.

Under its normal course issuer bid that expired on October 17, 2020, Frontera was authorized to repurchase for cancellation 6,532,400 Common Shares and Frontera purchased for cancellation 2,941,128 Common Shares between October 18, 2019 and October 17, 2020 at a volume weighted average price of C$9.788 per share. Purchases were made on the open market.

Frontera's 2021 Guidance

While preparing its 2021 Guidance, the Company considered options to increase production in Colombia this year. Frontera has a stable 2P reserve base and a large pool of assets, from which the Company identified the best combination of wells and drilling to deliver the highest capital efficiency. Various production and capex scenarios were reviewed that would have seen increased production and EBITDA through higher development capex, particularly in its key heavy oil field Quifa. The Company believes its 2021 capital plan optimizes both capital efficiency and free cash flow after development capex in 2021 and beyond.

Frontera developed its 2021 guidance using an average 2021 Brent price of $60/bbl and an exchange rate of 3,500 Colombian Pesos per US dollar. Given the current oil price environment above $60/bbl Brent, every one dollar average annual increase to our $60/bbl Brent price assumption for 2021 would increase Operating EBITDA by approximately $10 million (including hedging).

2021 Guidance Metrics

Capital Program

Frontera expects its total 2021 capital program to be approximately $200-$295 million on a consolidated basis. This total includes approximately $110-$130 in development capital to maintain the Company's production volumes – a significant reduction on a per barrel basis compared to previous years. Development costs for the 2021 budget are expected to be approximately 40%-50% lower than 2019 due to cost efficiencies and process improvements the Company achieved in 2020.

The Company expects based on presently available information that the total cost of the Guyana exploration program in 2021 will be approximately $90 million, principally to drill the Kawa-1 well offshore Guyana, with its share of that cost depending on whether or not it elects to pursue strategic options, and $15-25 million for Berbice Port (Guyana) construction. Frontera anticipates spending $30-$40 for exploration in Colombia including drilling two exploration wells in VIM-1 and to complete seismic and preparatory work in Ecuador in advance of potential drilling in 2022. The Company anticipates generating operating EBITDA of $275-$325 million.

Production and Production Costs

Frontera's 2021 Plan anticipates a production exit rate of approximately 43,000 boe/d and average annual production of 40,500 – 42,500 boe/d, all from Colombia. Production costs are expected to average $10-$11 per boe, below full year 2020. Included in this guidance, the Company may recognize a portion of its post-termination remediation costs in Peru as 2021 operating costs with an impact of approximately $0.50/boe.

Transportation Costs

Transportation costs are expected to average $10.50 – $11.50 per boe in 2021, in line with full-year 2020. This includes the impact of the sale of the oil inventory in Peru of approximately $0.50 per boe and the expected impact of additional take or pay contracts stemming from the pipeline settlement announced on November 17, 2020 (approximately $0.20 per boe on a full year basis assuming the settlement is approved around mid-year).

Colombia Update 

In the VIM-1 block, in the Lower Magdalena Valley, Frontera (50% W.I.) and Parex (Operator, 50% W.I.), completed the permitting and approval process and progressed the development plan concept including gas commercialization and infrastructure requirements for the exciting La Belleza-1 light oil and natural gas discovery.

Regulatory approval to extend the current VIM-1 block boundaries by approximately 32,000 acres was recently received. Building on the success of the La Belleza discovery, the Joint Venture anticipates drilling two additional exploration wells in the VIM-1 block in 2021. In addition, the Company plans to begin additional preliminary work in the VIM-22 block ahead of drilling in 2022.

In 2021, the Company plans to drill at least 19 wells in Quifa and 15 wells in CPE-6. At this activity level, development costs at Quifa, its largest field, have been lowered to $8/boe in 2021, down 60% from $20/boe in 2019. The Company expects steady production volumes in the heavy oil business unit, backstopped by production from CPE-6 that is expected to increase by approximately 40% this year due to further drilling and construction of additional water-handling facilities. In the Company's light and medium oil business unit, the Company plans to drill two wells in the Coralillo field as part of the continued development of the Guatiquia block.

Guyana Update

Frontera and CGX, joint venture partners, will continue to progress its exciting exploration program in the Corentyne and Demerara blocks, offshore Guyana.

In the Corentyne block, the Company plans to spud the Kawa-1 exploration well during the second half of this year and expects to drill the well in a water depth of approximately 1,100 feet targeting the Campanian-Santonian Zones.

In the Demerara block, the Company continues to advance its preparatory work for the Makarapan-1 exploration well (previously called Demerara-F), an Aptian stratigraphic prospect on the block. Additional prospects and leads on the block have been identified and are being matured by the Joint Venture.

An independent external qualified resource evaluation, prepared as of August 31, 2020, identified 27 prospects in the Corentyne block and 5 prospects in the Demerara block. Frontera's consolidated interest (82.6%) is equivalent to a mean volume prospective resources of 6,089 MMboe unrisked and 1,090 MMboe risked. The fluid content considered for the prospects is mainly oil (64%), natural gas (28%) and the remainder condensate (8%). See 'Oil and Gas Information Advisories'.

Peru Update

On February 5, 2021, the Company's service contract for Block 192 expired as per its terms and the Company is no longer operating on the block. At year-end 2020, Frontera's produced oil inventory in Peru was approximately 1 million barrels. In January 2021, Frontera sold approximately 400,000 barrels of this inventory. The Company has begun remediation work in Block 192 and it expects to pay for any required remediation costs in Block 192 through the sale of its oil inventory in Peru. On Block Z-1, Frontera has begun work to abandon its offshore platforms as it pursues its exit from Peru. 

Ecuador Update

In Ecuador, Frontera is planning seismic acquisition and other preliminary activities in 2021 in advance of drilling in the Espejo block (Frontera 50% W.I., GeoPark 50% W.I. and operator) and Perico block (Frontera 50% W.I. and operator and GeoPark 50% W.I.) in the second half of 2021 or early 2022.

An update on Frontera's Environmental, Social and Governance (ESG) strategy

Frontera is committed to conducting business safely and in a socially, environmentally and ethically responsible manner. Frontera has made significant progress on standardizing its approach to ESG across the business, and the Company is proud to be recognized for the first time on February 23, 2021 as one of the world's most ethical companies in 2021 by Ethisphere, a global leader in defining and advancing the standards of ethical business practices.

Frontera was one of only three honorees in the Oil & Gas, and Renewables category and joins 134 global companies, from 22 countries and 47 industries recognized by Ethisphere. Ethisphere's assessment process included more than 200 questions on culture, environmental and social practices, ethics and compliance activities, governance, diversity and initiatives to support a strong value chain. The full list of Ethisphere's World's Most Ethical Companies for 2021 can be found here: https://worldsmostethicalcompanies.com/honorees.

Hedging Update

The Company uses a combination of Brent oil price linked purchased put options, zero cost collars, put spreads and three-way collars to protect the Company's balance sheet and capital program within hedging limits set by the Board of Directors. The following table summarizes Frontera's hedging position as of March 3, 2021.

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".

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Advisories:

Cautionary Note Concerning Forward-Looking Statements

This news release contains forward-looking statements. All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future (including, without limitation, statements regarding estimates and/or assumptions in respect of the corporate strategy, the Company's guidance (including production levels, production and transportation costs, Operating EBITDA, capital expenditure, infrastructure and exit production levels), intentions to implement an NCIB, future income generation capacity, impact of oil price changes on the Company's Operating EBITDA, the Company's exploration and development plans and objectives, including its drilling plans and the timing thereof and receipt of government approvals ) are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to the Company. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, 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. Factors that could cause actual results or events to differ materially from current expectations include, among other things: volatility in market prices for oil and natural gas (including as a result of a sustained low oil price environment due to the COVID-19 pandemic and the actions of OPEC and non-OPEC countries and the restrictions imposed by governments in response thereto; the duration and spread of the COVID-19 pandemic and its severity, the success of the Company's program to manage COVID-19; uncertainties associated with estimating and establishing oil and natural gas reserves and resources; liabilities inherent with the exploration, development, exploitation and reclamation of oil and natural gas; uncertainty of estimates of capital and operating costs, production estimates and estimated economic return; increases or changes to transportation costs; expectations regarding the Company's ability to raise capital and to continually add reserves through acquisition and development; the Company's ability to access additional financing; the ability of the Company to maintain its credit ratings; the ability of the Company to: meet its financial obligations and minimum commitments, fund capital expenditures and comply with covenants contained in the agreements that govern indebtedness; political developments in the countries where the Company operates; the uncertainties involved in interpreting drilling results and other geological data; geological, technical, drilling and processing problems; timing on receipt of government approvals; fluctuations in foreign exchange or interest rates and stock market volatility and the other risks disclosed under the heading "Risk Factors" and elsewhere in the Company's annual information form dated March 3, 2021 filed on SEDAR at www.sedar.com. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.

This news release contains future oriented financial information and financial outlook information (collectively, "FOFI") (including, without limitation, statements regarding expected average production, production costs, transportation costs, Operating EBITDA, capital expenditures and exit production levels), and are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraph. The FOFI has been prepared by management to provide an outlook of the Company's activities and results, and such information may not be appropriate for other purposes. The Company and management believe that the FOFI has been prepared on a reasonable basis, reflecting management's reasonable estimates and judgments, however, actual results of operations of the Company and the resulting financial results may vary from the amounts set forth herein. Any FOFI speaks only as of the date on which it is made and the Company disclaims any intent or obligation to update any FOFI, whether as a result of new information, future events or results or otherwise, unless required by applicable laws.

Non-IFRS Financial Measures

This news release contains financial terms that are not considered in the International Financial Reporting Standards ("IFRS"): Operating EBITDA does not have any standardized meaning, and therefore are unlikely to be comparable to similar measures presented by other companies. These non-IFRS measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These financial measures are included because management uses this information to analyze operating performance and liquidity.

Management believes that EBITDA is a common measure used to assess profitability before the impact of different financing methods, income taxes, depreciation and impairment of capital assets and amortization of intangible assets. Operating EBITDA represents the operating results of the Company's primary business, excluding the effects of capital structure, other investments (infrastructure assets), non-cash items that depend on accounting policy choices, and one-time items that are not expected to recur.

Please see the Company's most recent Management's Discussion and Analysis, which is available at www.sedar.com for additional information about these financial measures.

Oil and Gas Information Advisories

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 Colombian Ministry of Mines and Energy. Guyana resource information is based on a Mcf to boe conversion of 6 to 1.

Resource Definitions

Resource definitions, including those set out below, are set out in NI 51–101, and in the COGE Handbook.

"Resources" encompasses all petroleum quantities that originally existed on or within the earth's crust in naturally occurring accumulations, including discovered and undiscovered (recoverable and unrecoverable) plus quantities already produced.

"Prospective Resources" are defined as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity.

The chance of development is defined as the probability of a project being commercially viable. Quantifying the chance of development requires consideration of both economic contingencies and other contingencies, such as legal, regulatory, market access, political, social license, internal and external approvals and commitment to project finance and development timing. As many of these factors are extremely difficult to quantify, the chance of development is uncertain and must be used with caution.

Estimates of resources always involve uncertainty, and the degree of uncertainty can vary widely between accumulations/projects and over the life of a project. Consequently, estimates of resources should generally be quoted as a range according to the level of confidence associated with the estimates. An understanding of statistical concepts and terminology is essential to understanding the confidence associated with resources definitions and categories.

"Prospect" is defined as a potential accumulation within a play that is sufficiently well defined to present a viable drilling target.

The range of uncertainty of estimated recoverable volumes may be represented by either deterministic scenarios or a probability distribution. Resources should be provided as low, best and high estimates, as follows:

• Low Estimate - This is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
• Best Estimate - This is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
• High Estimate - This is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.
• Mean Estimate - represents the arithmetic average of the expected recoverable volume. It is the most accurate single point representation of the volume distribution.

The resource estimates presented above are subject to certain risks and uncertainties, including those associated with the drilling and completion of future wells, limited available geological and geophysical data and uncertainties regarding the actual production characteristics of the reservoirs, all of which have been assumed for the preparation of the resource estimates. In addition, significant negative factors related to the Prospective Resource estimate include a lack of infrastructure and transportation in the Corentyne and Demerara area and the capital expenditures and financing required for the joint venture to satisfy its obligations under the petroleum agreements and its proposed drilling and exploration program.

Definitions:

SOURCE Frontera Energy Corporation