FiGambler

Tag: O&G

Back to Blogging 11/6/2021

Posted on by figambler

I have been quiet for some time due to personal reasons, but I haven’t stopped buying in the market. Moving around during the pandemic sure is fun, but the pain of moving is excruciating. Currently I’m living beautiful British Columbia.

New Home in Vancouver

Investment Update

But just a quick update on where I am – in the past 2 months, I have increased my position in Frontera Energy by 25% and increased my position in Petrotal by 1.8%. Currently, Frontera and Petrotal offers significant upside, due Frontera’s Guyana exploration program, and Petrotal’s social unrest, and production increase.

PTAL Catalysts

  • 9H
  • ONP reopening

FEC Catalyst

  • Dividend reinstatement
  • Puerto Bahia
  • Kawa-1 results
  • Colombia exploration and production increase
  • NCIB

While I’m preparing to get back to more blogging, I’m anxiously waiting for Frontera’s Kawa-1 well results, and Petrotal’s 9H Completion. Exciting times ahead!

My RSUs just unvested, so I have plenty of liquidity to purchase more. We are just in the beginning of O&G Bull Market.

FEC refinances bonds at a lower rate and it’s implications

Posted on by figambler

FEC will be issuing $400 million in senior unsecured notes due 2028 at a coupon rate of 7.875% and buying back their $350 million worth of 2023 9.70% senior secured notes at 104.95% premium. This indicates a 1.825% difference in interest payments.

I believe there will be associated costs to pay any financings fees and the 4.95% premium on existing bonds; though the impact will be short lived. The long term benefit would be $2.45 million/annum in interest savings since the loan is now $400 million.

Bigger loan, smaller interest payment, why not?

The reduction in financing cost is a sound move, but the interesting part is this shows rating agencies believe Frontera is a lower risk investment than it was a year ago.

The 2028 Notes have been assigned a rating of B+ by S&P Global Ratings with a Stable Outlook and a rating of B with a Stable Outlook by Fitch Ratings.*

With an even stronger balancing sheet, Frontera is poised to take on Guyana, the elephant in the room, and Puerto Bahia, the giraffe in the room – meanwhile taking advantage of its strong production at $70 oil prices.

I do wonder what Frontera is going to do with the extra $50 million dollars; save it for a rainy say? Continue to develop Guyana upon initial drilling success; or take Puerto Bahia to profitability?

source: https://fronteraenergy.mediaroom.com/2021-06-10-Frontera-Prices-Oversubscribed-and-Upsized-US-400-Million-Senior-Unsecured-Notes-Offering-at-7-875

Frontera Energy Q1 2021 thoughts

Posted on Modified on by figambler

Frontera, despite reporting a loss in Q1 2021, if you read closely in MD&A and Financial statement, you’d notice that they have a lot of income generated from its midstream asset – $19 million USD in Q1. This is not part of OPERATING EBITDA.

source: https://www.fronteraenergy.ca/content/uploads/2021/05/Frontera-FS-Notes-Q1-2021.pdf
source: https://www.fronteraenergy.ca/content/uploads/2021/05/FEC-MDA-Q1-21.pdf

ODL

  • Share of income – $9.8 million
  • Dividends Receivable – $28.8 million

For the three months ended March 31, 2021, the Company recognized $9.8 million as its share of income from ODL which was
$2.4 million lower than the same period of 2020 primarily due decrease in the transportation tariff since the second quarter 2020
and impact of foreign exchange fluctuations. During the three months ended March 31, 2021, the Company recognized gross
dividends of $41.6 million and a return of capital of $4.2 million. As at March 31, 2021, the Company has accounts receivables of
$28.5 million of dividends and return of capital contributions.

source: https://www.fronteraenergy.ca/content/uploads/2021/05/FEC-MDA-Q1-21.pdf

During the three months ended March 31, 2021, the Company recognized gross dividends of $41.6 million, (2020: $24.5
million) and received cash dividends of $9.0 million, (2020: $38.7 million). As at March 31, 2021, the carrying value of
dividends receivable after withholding taxes is $26.6 million (2020: $Nil). In addition, during the three months ended March 31, 2021, the Company recognized a return of capital of $4.2 million, (2020:$Nil) and received in cash $2.0 million (2020: $Nil).

source: https://www.fronteraenergy.ca/content/uploads/2021/05/Frontera-FS-Notes-Q1-2021.pdf

Puerto Bahia

Operating income: $10 million

For the three months ended March 31, 2020, prior to the acquisition of a controlling interest in Puerto Bahia on August 6, 2020,
the Company had recognized $25.1 million as its share of losses from IVI mainly due to higher unrealized foreign exchange
losses on the revaluation of Puerto Bahia’s USD-denominated bank debt. For the three months ended March 31, 2021 Puerto
Bahia has generated $10.0 million of segment operating income primarily from take-or-pay contracts in its liquid bulk storage
terminal business.

source: https://www.fronteraenergy.ca/content/uploads/2021/05/FEC-MDA-Q1-21.pdf

Bicentenario

Are they actually going to receive their dividends?

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FEC Cont’d

Posted on by figambler

FEC is getting very close on acquiring CGX Energy now that they’ve established a 19 million dollar loan deal with CGX Energy. FEC will have the option to convert the loan into shares, which represents “9.28% of the currently issued and outstanding common shares of CGX.”

If FEC decides to convert their loan into CGX shares, FEC will control more than 80% of CGX Energy.

Fun times ahead!

source: https://ceo.ca/@newswire/frontera-and-cgx-announce-19-million-loan-agreement

PTAL – road to recovery

Posted on Modified on by figambler

From Flying to Crashing to Take off again

PTAL had an excellent 2019 and was on the verge of taking off in 2020; unfortunately, Covid 19 had a major impact on the oil market and Peru – oil prices crashed, followed by ONP shutdown, followed by social and political unrest. What a crazy year!

Strapped on cash, halted cashflow and flooded with liability, PTAL sadly had to raise at a less than ideal price. I wasn’t too happy about that.

But it appears things have turned in Q4 2020, with ONP re-opening, Brazil export route successful with decent netback, and RBL and Vendor liability discussions in progress.

PTAL plans to resume production to 10000 BOPD in mid January 2021, meaning A LOT of cashflow.

With most concerns out of the way, we might wonder, what’s going to happen with contingent liability, and vendor liability. Lowie reached out to PTAL Management and have the following summarized.

Summary from PTAL:

  • Vendors supportive
  • Understand issue is community / govt • managing funds carefully
  • at full production all obligations can be met quickly
  • as 2nd largest producer and plenty of drilling planned vendors know there’s lots more to come.
  • global market stability is helping with RBL etc discussions and hopeful will conclude soon

From what we gathered, contingent and vendor liability will be resolved, which is excellent news.

I look forward to a fruitful 2021 for PTAL.

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