New Loan Provides Flexibility To Invest In Key Strategic Initiatives
CALGARY, AB, March 27, 2023 /CNW/ - Frontera Energy Corporation (TSX: FEC) ("Frontera" or the "Company") announces that Frontera's wholly-owned subsidiary, Pipeline Investment Limited ("PIL"), which owns a 35% equity interest in Oleoducto de los Llanos Orientales S.A. ("ODL"), and Macquarie Group (the "Lender") have entered into a credit agreement (the "Credit Agreement") through which the Lender will provide a US$120 million loan facility (the "New Loan") to PIL, guaranteed by Sociedad Portuaria Puerto Bahía S.A. ("Puerto Bahía"), Frontera Bahía Holding Ltd. ("Frontera Bahia"), and Frontera ODL Holding Corp., the parent company of PIL. The New Loan is effectively supported by the cash flows from Frontera's standalone and growing midstream business, is non-recourse to Frontera and remains subject to customary closing conditions.
Gabriel de Alba, Chairman of the Board of Directors, commented:
"Frontera continues to generate shareholder value from across its portfolio by unlocking the sum of its parts. This Credit Agreement refinances Puerto Bahia's debt, extending its term to December 2027 and most importantly, provides Frontera's midstream segment with optionality to execute its key strategic initiatives. The Company looks forward to continuing to build value for shareholders."
Orlando Cabrales, Chief Executive Officer of Frontera, commented:
"Puerto Bahia is a state-of-the-art liquids and dry cargo facility port terminal strategically located in the Bay of Cartagena. Frontera, through its separate midstream business, owns 99.8% of Puerto Bahia. This successful refinancing is another positive step forward for Frontera as we seek to position our standalone and growing midstream business to unlock shareholder value."
Catalina Hayata, Managing Director and Head of Latin America Private Credit in Macquarie's Commodities and Global Markets business commented:
"This loan facility not only assists with the refinancing of Puerto Bahia's debt, but also demonstrates our support of Frontera's efforts to grow its midstream business. As we expand our presence in Latin America, we look forward to providing capital solutions to our key clients in the region and identifying new ways to deliver innovative financing solutions in a growing market."
The proceeds of the New Loan will be primarily used to repay in full the existing senior loan of Puerto Bahía maturing in June 2025, which has an outstanding balance plus accrued interest of $106.2 million. The New Loan will also pay transaction fees and expenses and fund a 6-month debt service reserve account. Any remaining amounts shall be distributed to Frontera or any of its affiliates, at Frontera's discretion, or kept by Puerto Bahia to finance future growth projects. The Credit Agreement also includes an accordion feature for up to $30 million, which may be drawn by Puerto Bahia, subject to Lender' consent in order to fund additional investment opportunities, including potential liquids and dry terminal expansion projects.
The New Loan pays semi-annually, amortizes during the term of the loan, and has a scheduled $45 million payment due upon maturity in December 2027. The New Loan has two tranches which include a $100 million amortizing tranche that pays a Secured Overnight Financing Rate ("SOFR") 6-month term plus margin of 7.25% per annum and a $20 million bullet maturity tranche that pays a fixed rate of 11.00% per annum.
In September 2022, Frontera acquired the remaining 40.07% interest it did not already own in PIL for an aggregate cash consideration of approximately $47.4 million, including $21 million immediately following the closing of the transaction. The transaction was an important milestone for the Company as it increased Frontera's direct interest in the ODL pipeline to 35%, strengthened Frontera's midstream cash flows, and created a self-sustaining and growing midstream business.
The ODL pipeline is a 260-kilometre, 24-inch pipeline with throughput capacity of 300,000 bbl/d at 18° API that transports Frontera's heavy crude oil from the Quifa SW and Cajua fields and part of the CPE-6 field, as well as other third-party production from the Llanos basin, including from Ecopetrol, Hocol, Geopark and Parex, and connects the OCENSA pipeline at Cusiana and Monterrey to the export terminal in Coveñas. Ecopetrol's Cenit Transporte y Logística de Hidrocarburos S.A.S. owns the remaining 65% of ODL.
Puerto Bahia is a state-of-the-art liquids and dry cargo facility port terminal strategically located on a 155-hectare site in the Bay of Cartagena. Inaugurated in 2015, Puerto Bahia provides loading, unloading, receipt, storage and dispatch import and export services.
Puerto Bahia's liquid bulk terminal operational capacity is 2.6 MMbbl, distributed amongst eight storage tanks with heating and blending functionalities, 16 loading and unloading stations for tanker trucks, two docking positions for barges and a liquid jetty with two docking positions for vessels with up to 1.2 million barrels of capacity.
The barge platform features four berths and eight tanker truck stations that are interconnected with the storage tanks.
Puerto Bahia's general dry cargo terminal features a 290-metre long, 44-metre wide berthing platform and covers a total area of 16 hectares (40 acres) with covered and uncovered storage capacity and equipment for cargo handling.
Puerto Bahia's 18-metre natural depth makes it the only private multi-purpose terminal in Colombia capable of receiving Panamax ships (large cargo and vessels) and Suezmax tankers (liquid purpose vessels) simultaneously.
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 31 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.
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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 relating to the use of proceeds of the New Loan, the amounts that will be drawn on the New Loan in order to repay all amounts owing under Puerto Bahia's legacy debt, the material terms of the New Loan, including the accordion feature for up to $30 million, which may be drawn by Puerto Bahia, subject to Lenders' consent, in order to fund additional investment opportunities, including potential liquids and dry terminal expansion projects; the Company's ability to satisfy the conditions precedent to closing the New Loan, the New Loan being effectively supported by the cash flows from Frontera's standalone and growing midstream business, Frontera's belief that refinancing Puerto Bahia's legacy debt is a positive step forward for Frontera as it continues to unlock shareholder value from its midstream business; the optionality provided by the New Loan to Frontera's midstream segment to fund its key strategic initiatives; and the Company's expectations that it will continue to generate shareholder value from across its portfolio by unlocking the sum of its parts. All information other than historical fact is forward-looking information.
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, but not limited to, expectations and assumptions of the Company relating to all conditions precedent to closing of the New Loan being satisfied in a timely manner, the amounts that will be drawn on the New Loan in order to repay all amounts owing under Puerto Bahia's legacy debt, and that the material terms of the New Loan do not change prior to closing.
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 March 1, 2023, its annual management's discussion and analysis for the year ended December 31, 2022, and other documents it files from time to time with securities regulatory authorities describe the risks, uncertainties, material assumptions and other factors that could influence actual results and such factors are incorporated herein by reference. Copies of these documents are available without charge by referring to the Company's profile on SEDAR at www.sedar.com. All forward-looking information 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 information, whether as a result of new information, future events or results or otherwise.
Certain information included in this news release may constitute future oriented financial information and financial outlook information (collectively, "FOFI") within the meaning of applicable Canadian securities laws. The FOFI has been prepared by management to provide an outlook of the Company's activities and results and may not be appropriate for other purposes. Management believes that the FOFI has been prepared on a reasonable basis, reflecting management's reasonable estimates and judgments; however, actual results of the Company's operations and the resulting financial outcome may vary from the amounts set forth herein. Any FOFI speaks only as of the date on which it was made, and the Company disclaims any intent or obligation to update any FOFI, whether as a result of new information, future events or otherwise, unless required by applicable laws.
SOURCE Frontera Energy Corporation