Frontera Energy (TSX: FEC) is getting out of the upstream business. The company this morning announced that it has reached an agreement to sell their subsidiary Frontera Petroleum International, which consists of the firms entire Colombian upstream business.
Included in the sale are all of the company’s oil and gas exploration and production assets within Colombia, along with their reverse osmosis water treatment facility and the palm oil plantation. The assets are set to be sold to Geopark Limited at an equity valuation of $400 million, of which $375 million is to be paid up front and $25 million is set as contingent payments that are payable upon certain milestones.
That price tag is said to have a 25% premium to the 90-day volume weighted average price and a 18% premium to the current equity valuation of Frontera, despite just focusing on the E&P assets of the company.
As part of the arrangement, GeoPark is also to assume obligations under Frontera’s $310 million in outstanding 2028 unsecured notes, as well as $80 million under the Chevron prepayment facility. Total implied valuation for the assets as a result sits at $622 million.
The transaction as a result will see Frontera transition to an infrastructure company, with major assets moving forward to include the Puerto Bahia multimodal maritime terminal in Colombia, and a 35% interest in the 300,000 bbl/d ODL pipeline. The company at the same time will be retaining interests in Guyana and certain non-Colombian assets. 2025 distributable cash flow of approximately $77 million is expected from this asset base.
“Following an exhaustive review of the Company’s alternatives, we believe this Transaction crystallizes value for shareholders at an attractive premium for our Colombian E&P assets, converting exposure to oil prices into cash, and retaining upside through a standalone Infrastructure Business,” commented Orlando Cabrales, CEO of Frontera.
Upon completion of the transaction, Frontera says it intends to distribute to shareholders $370 million, or C$7.18 per share, the details of which are being finalized.
The transaction is currently expected to close in the second half of 2026, subject to shareholder approval.
Frontera Energy last traded at $6.58 on the TSX.
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