pcJ News Briefs – Frontera Energy Corporation (TSX: FEC), formerly Pacific Exploration & Production Corporation, a portfolio company of Catalyst Capital Group, has entered into an agreement to acquire the outstanding 36.36% ownership of Pacific Midstream Limited (PML) from the International Finance Corporation and from funds related to the International Finance Corporation for US $225 million, to be paid in instalments over a 36-month period, plus accrued interest over unpaid amounts.
Upon closing of the transaction, Frontera Energy will own 100% of Pacific Midstream which also stakes in the associated companies: Petroelectrica de los Llanos (100% ownership), Oleoducto Bicentenario de Colombia S.A.S (43% ownership), and Oleoducto de los Llanos Orientales S.A (35% ownership).
On December 17, 2014, Frontera sold 36.36% interest in Pacific Midstream to IFC, IFC Global Infrastructure Fund and a consortium of investors for US $240 million.
In connection with the sale, Frontera entered into a put option agreement with IFC and its co-investors in Pacific Midstream pursuant to which IFC and such co-investors would be entitled to require Pacific Midstream Holding, Pacific Midstream or Frontera to acquire such investors’ shares of Pacific Midstream under certain conditions. The put price is set at the amount that would be required to be paid to IFC’s and its co-investors in order for them to realize a 15% internal rate of return on their US $240 million investment in Pacific Midstream.
During the year ended December 31, 2016, Frontera received US $120.4 million in cash dividends from associated companies and distributed US $41.8 million in cash dividends to IFC.
Catalyst Capital Group owns approximately 30.78% of Frontera’s common shares.
photo credit: Frontera Energy
News Release
FRONTERA ANNOUNCES THE SIGNING OF AN AGREEMENT FOR THE STRATEGIC ACQUISITION OF PACIFIC MIDSTREAM LIMITED
First Step in a Series of Transactions Anticipated to Reduce Transportation Costs and Related Financial Commitments
Toronto, Canada, October 16, 2017 – Frontera Energy Corporation (TSX: FEC) (“Frontera” or the “Company”) announces that it has signed an agreement to acquire the outstanding 36.36% ownership of Pacific Midstream Limited (“PML”) from the International Finance Corporation and from funds related to the International Finance Corporation (jointly, the “IFC Parties”). Following the acquisition, Frontera will own 100% of PML which will enable the Company to pursue initiatives related to the reduction of, and unwinding of, various transportation commitments, including fixed rate take-or-pay arrangements.
Consideration for the acquisition will be $225 million in cash, paid in instalments over a 36-month period, plus accrued interest over unpaid amounts.
The completion of the transaction is subject to obtaining modifications to Frontera’s take-or-pay contracts, which are expected to reduce tariffs, and other customary conditions of closing. In addition, the consent of the Company’s noteholders and secured lenders is required to complete the transaction.
Following the acquisition, PML will be a 100% consolidated entity of Frontera and will include the following entities and ownership percentages:
Petroelectrica de los Llanos (100% ownership),
Oleoducto Bicentenario de Colombia S.A.S (43% ownership), and
Oleoducto de los Llanos Orientales S.A (35% ownership).
Gabriel de Alba, Chairman of Frontera, commented, “This is a very strategic acquisition for Frontera as we pursue a series of initiatives intended to reduce our corporate transportation costs, provide long term transportation flexibility, and reduce fixed cost transportation obligations.”
Barry Larson, Chief Executive Officer, commented, “This initiative is important for Frontera as we look to right size our transportation costs. I would like to thank those who contributed to the success of these negotiations and this transaction, especially our Corporate Development and Transportation and Marketing teams who continue to work diligently to help us increase our margins by reducing our costs.”
Jorge Fonseca, Vice President, Corporate Development, commented, “We would like to thank the IFC Parties for their partnership in PML over the past three years and look forward to continuing to work together as co-owners in other strategic assets such as Puerto Bahia, our strategic deep-water port outside Cartagena, Colombia.”
During the year ended December 31, 2016, the Company received $120.4 million in cash dividends from associated companies and distributed $41.8 million in cash dividends to minority interests of PML.
About Frontera:
Frontera is a Canadian public company and a leading explorer and producer of crude oil and natural gas, with operations focused in Latin America. The Company has a diversified portfolio of assets with interests in more than 25 exploration and production blocks in Colombia and Peru. The Company’s strategy is focused on sustainable growth in production and reserves and cash generation. Frontera is committed to conducting business safely, in a socially and environmentally responsible manner.
The Company’s common shares trade on the Toronto Stock Exchange under the ticker symbol “FEC”.
If you would like to receive News Releases via e-mail as soon as they are published, please subscribe here: http://fronteraenergy.mediaroom.com/subscribe
Advisories:
The financial information contained herein is reported in United States dollars.
FRONTERA ENERGY CORPORATION
1100 – 333 BAY STREET, TORONTO, ONTARIO M5H 2R2
TELEPHONE: (416) 362-7735 FAX: (416) 360-7783
FOR FURTHER INFORMATION:
Grayson Andersen
Corporate Vice President, Capital Markets
+57-314-250-1467
ir@fronteraenergy.ca
www.fronteraenergy.ca