TORONTO and BOGOTÁ,
Nov. 17, 2020 /CNW/ - Frontera Energy
Corporation (TSX: FEC) ("Frontera"), Cenit Transporte y Logística
de Hidrocarburos S.A.S. ("CENIT") and Oleoducto Bicentenario de
Colombia S.A.S. ("Bicentenario") separately announced today that
they have reached an agreement for the joint filing of a petition
for a binding settlement which, upon completion and approval by the
competent Colombian court, will resolve all the disputes pending
among them, related to the Bicentenario Pipeline ("BIC Pipeline") and the Caño Limón – Coveñas
Pipeline ("CLC Pipeline"), and will terminate all the pending
arbitration proceedings related to such disputes. All the Frontera
subsidiaries involved in those proceedings are also parties to the
agreement, and references to Frontera include such subsidiaries.
All financial amounts in this news release are in United States dollars, unless otherwise
stated.
The parties consider that this transaction eliminates any
uncertainty related to the potential outcomes of the disputes, thus
protecting the interests of all the parties and those of their
stakeholders. The settlement will also create new business
opportunities for the parties involved.
The settlement arrangement includes a full and final mutual
release upon closing of all present and future amounts claimed by
all parties in respect of the terminated transportation contracts
for both the CLC Pipeline and the BIC Pipeline, and also in respect of certain
related contracts involving the liabilities which are recorded by
Frontera as Cost Under Terminated Pipeline Contracts. Further
information about all those claims is contained in Frontera's
Interim Financial Statements dated November
3, 2020.
The transaction does not include any cash payments between the
parties, except for Frontera's release of its interests in a trust
fund (restricted cash) of approximately $28
million created as a collateral for one of the claims.
Frontera will transfer to CENIT its 43.03% interest in
Bicentenario, any related outstanding Bicentenario dividends, and
the BIC Pipeline line fill. The
claims released by Frontera include recovery of the letters of
credit drawn by Bicentenario in 2018 and all other claims that have
been asserted by Frontera against Bicentenario.
Frontera will also enter into new transportation contracts with
CENIT and its subsidiaries Bicentenario and Oleoducto de los Llanos
Orientales S.A. ("ODL").
The new ODL transportation contract is expected to commence in
the first quarter of 2021. The ODL transportation contract would
provide for a ship or pay commitment of 10,000 bbls/day for
approximately 3.8 years at a current tariff of $4.0/bbl. The ODL pipeline is regularly used by
Frontera to transport crude oil from its heavy oil district which
produces sufficient volumes to comply with the new obligations. The
new ODL contract is not expected to impact Frontera's
transportation costs.
The new transportation contracts with CENIT and Bicentenario for
use of the CLC Pipeline and BIC
Pipeline (and certain related facilities) will become effective
within a six month period as of the closing of the transaction. The
new take or pay commitment is projected to be approximately 3,900
bbls/day, subject to adjustments in changes in the oil price and
Colombia/U.S. exchange rates
between now and closing, for a term of five years at a current
tariff of $11.5/bbl. Frontera will
not have to make payments under the new transportation contracts
for oil that is required to be shipped on alternative pipeline
systems. Frontera will be able to use the CLC Pipeline and the
BIC Pipeline for the
transportation of oil to Coveñas as an alternative to the use of
the Ocensa pipeline. It is expected that the new contracts will
increase Frontera's average transportation costs by approximately
$0.30 per boe, or potentially less,
at current tariffs.
The arrangement is conditional upon certain regulatory
approvals, including approval of the settlement arrangement under
Colombian law which requires an opinion to be issued by the Office
of the Attorney General of Colombia (Procuraduría General de la
Nación) and approval of the Administrative Tribunal of
Cundinamarca, competent final appeals court with competence
regarding conciliation arrangements to which state owned companies
are a party. The settlement documentation provides that if such
approvals are not obtained by June 30,
2021 or such later date as may be agreed, then either party
will become entitled to terminate the settlement arrangement, and
that the legal rights of the parties with respect to the disputes
are not prejudiced unless and until the required approvals are
obtained and the settlement arrangement is closed. There can be no
assurance that the required approvals will be received on a timely
basis or at all.
About Frontera:
Frontera Energy Corporation is a Canadian public company and a
leading explorer and producer of crude oil and natural gas, with
operations focused in South
America. The Company has a diversified portfolio of assets
with interests in more than 40 exploration and production blocks in
Colombia, Peru, Ecuador
and Guyana. The Company's strategy
is focused on sustainable growth in production and reserves.
Frontera is committed to conducting business safely, ethically in a
socially and environmentally 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, the impact of the settlement arrangement on
future business opportunities for the Company, the effect the new
transportation agreements will have on the Company's transportation
cost, the ability to obtain certain regulatory approvals, including
an opinion from the Office of the Attorney General of Colombia and the approval of the
Administrative Tribunal of Cundinamarca) 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: political developments in Colombia; 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 "Risks and Uncertainties" in the Company's MD&A dated
November 3, 2020 and under the
heading "Risk Factors" and elsewhere in the Company's annual
information form dated March 5, 2020
filed on SEDAR at www.sedar.com. There can be no assurance that the
proposed conciliation will be implemented. 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.
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SOURCE Frontera Energy Corporation