Frontera Energy (TSX: FEC) has again entered into a definitive agreement to divest its entire Colombian upstream portfolio. The deal, which sees the company transitioning toward a specialized infrastructure model, involves the sale of its Colombian exploration and production assets to Parex Resources (TSX: PXT) for an implied value of $750 million, and comes after Frontera walked away from a prior arrangement with GeoPark Limited.
The transaction centers on the sale of Frontera Petroleum International, a subsidiary encompassing all of the firm’s oil and gas assets in Colombia, including a reverse osmosis water treatment facility and a palm oil plantation. The equity consideration for the deal is set at $525 million, consisting of $500 million in upfront cash and $25 million in milestone-based contingent payments.
Notably, Parex will also assume $310 million in outstanding 2028 unsecured notes and $80 million under a Chevron prepayment facility, adding to the transaction value.
This strategic pivot allows Frontera to crystallize value for its shareholders while mitigating direct exposure to volatile oil prices. CEO Orlando Cabrales emphasized that the transaction was the result of an exhaustive review of company alternatives, aimed at securing an attractive premium for the E&P assets.
The $525 million equity price represents a 31% premium over the previously proposed arrangement with GeoPark Limited, which came at a transaction value of $400 million. A $25 million termination fee was paid by Frontera in connection with the breaking of that agreement.
The revised terms are said to imply a valuation of $13.18 per share for Frontera when combined with cash resources on hand plus a “conservative” valuation of $150 million for Frontera’s Infrastructure Business.
Following the close of the deal, Frontera will reinvent itself as a focused infrastructure and midstream entity. Its core portfolio will be anchored by the Puerto Bahía multimodal maritime terminal in Colombia and a 35% interest in the 300,000 bbl/d ODL pipeline. The company also intends to retain its interests in Guyana and other non-Colombian assets. This streamlined asset base is projected to generate approximately $77 million in distributable cash flow for 2025.
Investors are set to benefit immediately from the divestiture. Frontera has announced plans to distribute approximately $470 million, or roughly C$9.18 per share, to its shareholders once the transaction concludes.
The deal is expected to close in the second quarter of 2026, pending customary shareholder and regulatory approvals.
Frontera Energy last traded at $12.98 on the TSX.
Information for this story was found via the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
