Frontera announces exploration discovery in Colombia, an operational update, future drilling plans and exercise of IFC put option

Acorazado-1 Testing Results Confirm a Light Oil Discovery on the Llanos-25 Block

Production Back Above 65,000 boe/d with Strong Operational Performance, Quifa Water Handling Project on Schedule and 34 Well Q4 Drilling Campaign

TORONTO, Oct. 9, 2018 /PRNewswire/ - Frontera Energy Corporation (TSX: FEC) ("Frontera" or the "Company"), today announced a light oil discovery from its Acorazado-1 exploration well on the 100% owned and operated Llanos-25 block in Colombia. Frontera also provided an operational update highlighting current production, major project activities and details regarding the fourth quarter drilling campaign.

Richard Herbert, Chief Executive Officer of Frontera, commented:

"The Acorazado-1 exploration well is the fourth exploration discovery in Colombia so far in 2018, adding to the discoveries at Alligator and Coralillo on the Guatiquia block, and Jaspe in the Quifa area. This maintains our 100% track record of discoveries in Colombia in 2018.

The Acorazado-1 well encountered a number of potential hydrocarbon zones in the target Mirador Formation reservoir and two drill-stem tests were conducted. As a result, I am pleased that we have made a light oil discovery in our first deep well in the Llanos foothills trend. Data collected during testing show the Acorazado reservoir pressure to be lower than that expected in an undrained reservoir, indicating a probable hydraulic connection with the adjacent Cusiana structure to the north. While the lowered reservoir pressure impacts potential flow rates, the well has identified a part of the structure which contains resources which have never been previously drilled and developed. We plan to put the Acorazado-1 well on long-term test in the near future.

Operationally, current production has returned to planned levels above 65,000 boe/d, with Block 192 production in Peru averaging over 10,000 bbl/d since the block was restarted in September. We expect to add to production during the fourth quarter as the water handling expansion project at Quifa SW is brought on-stream. Frontera's strong production profile is well-timed with the upcoming expiration of our oil hedges at the end of October which will increase our exposure to Brent oil prices by nearly $25 per barrel based on recent prices.

Additionally, we will be drilling some exciting exploration and appraisal wells during the fourth quarter including Coralillo-3 and Cocodrilo-1 on the Guatiquia block and additional Jaspe appraisal wells in the Quifa North area. Frontera will be presenting its 2019 operating plan and guidance in the second week of December, targeting production growth for the first time since restructuring in late 2016."

Exploration Discovery in Colombia

The Acorazado-1 exploration well was drilled to a total measured depth of 15,470 feet (15,197 feet true vertical depth) and encountered 356 feet of gross thickness in the Mirador formation sandstone reservoir. Open-hole wireline logging operations identified five separate, potentially hydrocarbon-bearing sections of the Mirador formation (Mirador I, II, III, IV and VI) with an estimated total net thickness of 82 feet. A drill-stem test ("DST") program with a tubing conveyed perforating system ("TCP") was designed to evaluate the potential hydrocarbon bearing sections in two separate tests, the first testing the Mirador VI section and the second testing the Mirador I, II, III and IV sections, commingled.

The Mirador VI reservoir, was tested from 20 feet of perforations, using a DST-TCP tool with an average 2,360 psi drawdown for 52 hours during the main flow test prior to a pressure buildup test at an average rate of 455 barrels of fluids per day at natural flow. The average oil rate was 427 bbl/d of 36.9-degree API crude with an average natural gas rate of 896 mcf/d during the test. In total there were 1,003 bbls of oil and 2.1 Mmcf of natural gas produced during the Mirador-VI main flow test period, with oil gravity varying from 35.2 to 37.6-degree API.  The maximum average flow rate over a 24-hour period at a choke size of 36/64^th of an inch was 606 barrels of fluid per day, with a maximum average rate of 570 barrels of oil per day and average gas rate of 1.06 Mmcf/d.

The main flow test period was followed by a pressure buildup test which ended with a short flow period at restricted flow rates to collect bottomhole and separator fluid samples for lab analyses. The Company will now proceed with completing the Mirador VI reservoir in the coming months and is in the process of applying to the Agencia Nacional de Hidrocarburos ("ANH") for a long-term testing license which will allow the Company to produce the well for six months with the potential for a further six-month extension while production facilities are placed at the well site.

The Mirador I to IV commingled reservoir was tested from 79 feet of total perforations, using a DST-TCP tool with an average 940 psi drawdown for 16 hours at an average rate of 370 barrels of fluids per day with a small volume of oil and natural gas.

Based on an evaluation of the results from both tests the Company believes that the intervals tested may have incurred formation damage from drilling and production testing operations which has limited the flow potential of the reservoir. Therefore, the Company will conduct an evaluation to identify potential methods to stimulate the Mirador I to IV and Mirador VI intervals to improve flow rates in the near-future. Any future development activities will be planned according to the results of the long-term test and further evaluation of the Mirador I to IV and Mirador VI intervals.

Operational Update

Current production after royalties is above 65,000 boe/d and is expected to increase throughout the fourth quarter. As part of the Company's measures to sustain production from its core Quifa SW field, the first stage of the water handling expansion project is expected to start up by the end of October with full implementation by the end of the year, providing an additional 3,000 to 4,000 bbl/d of net oil production. The Company remains on track to deliver annual production at or close to the low end of the guidance range of 65,000 to 70,000 boe/d, despite three months of downtime related to pipeline issues in Peru (over 2,000 bbl/d impact on 2018 average production), a blockade in the first quarter at Cubiro in Colombia (approximately 500 bbl/d impact on 2018 average production) and higher than planned high price royalty payment volumes at Quifa (over 2,000 bbl/d impact on 2018 average production).

Fourth Quarter and 2019 Drilling Update

During the fourth quarter of 2018, the Company expects to drill 34 wells, with 18 development wells at Quifa SW, seven water injection wells, two development wells at Candelilla on the Guatiquia block, two development wells at Zopilote Sur on the Cravo Viejo block and five exploration and appraisal wells including;

Coralillo-3 (Guatiquia block): follow up appraisal well to the Coralillo-1 exploration well which tested over 1,000 bbl/d from the Lower Sand-1 formation and 800 bbl/d from the Guadalupe formation. The well was spud on October 8, and is expected to take 30 days to drill and 15 days to test.

Cocodrilo-1 (Guatiquia block): the third exploration target on the Guatiquia block in 2018, is targeted to spud in mid-November with drilling and testing operations complete by year end.

Jaspe-7D and Jaspe-8D (Quifa North area): two appraisal wells following up on the Jaspe-6D well drilled in January which tested at 187 bbl/d for 11 days. Jaspe 7D is expected to spud in the second half of December. With success, these appraisal wells will open up another large field development area in North Quifa adjacent to the Cajua field. 

In 2019, the Company is planning to drill up to 10 exploration wells that will appraise recent new discoveries or target new prospects. New exploration projects include two exploration prospects on the Guama block, two exploration prospects on the Mapache block and two exploration prospects on the Sabanero block. The Company is considering participation in the Intracampos Bid Round in Ecuador, and any license round activities from the ANH in Colombia.

Update Concerning Pacific Midstream Limited

The International Finance Corporation and related funds (the "IFC") have provided notice to the Company that they have exercised their right under the Pacific Midstream Limited ("PML") shareholders agreement to receive without further payment additional shares in PML, as a result of certain historical milestones on the Petroeléctrica de los Llanos transmission line not being met. Upon issuance of the additional PML shares to IFC, Frontera will be a 59.93% shareholder in PML (previously 63.64%), with the IFC holding the remaining 40.07% interest (previously 36.36%).

In addition, on September 11, 2018 the IFC provided a form of notice exercising PML's Bicentenario Put Option which requires Frontera to purchase from PML its ownership interest in the Bicentenario pipeline. This option is exercisable by the IFC pursuant to the PML shareholders agreement solely in the event that the Bicentenario pipeline is non-operational for six consecutive months, and as a result, the Bicentenario ship or pay contracts with the Company's affiliates are terminated. The notice from IFC refers to the actions Frontera took to terminate those ship or pay contracts in July. The purchase price is determined by a formula and is currently approximately US$85 million. Frontera is reviewing the form of notice and the transaction would be subject to documentation and prior approval of the Toronto Stock Exchange. If the transaction is completed it would increase Frontera's aggregate indirect ownership interest in the Bicentenario Pipeline to 43.03% (currently 26.39%) at a net cash cost expected to be approximately US$34 million after the proceeds of the put transaction are distributed by PML to its shareholders (Frontera's share of those proceeds is expected to be approximately US$51 million).

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 Latin America. The Company has a diversified portfolio of assets with interests in more than 30 exploration and production blocks in Colombia and Peru. The Company's strategy is focused on sustainable growth in production and reserves. Frontera is committed to conducting business safely, 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, statements regarding estimates and/or assumptions in respect of production, potential resources and reserves, drilling, exploration and development plans and objectives) 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: uncertainty of estimates of capital and operating costs, production estimates and estimated economic return; uncertainties associated with estimating oil and natural gas reserves; failure to establish estimated resources or reserves; volatility in market prices for oil and natural gas; the uncertainties involved in interpreting drilling results and other geological data; obtaining required approvals of regulatory authorities; and the other risks disclosed under the heading "Risk Factors" and elsewhere in the Company's annual information form dated March 27, 2018 filed on SEDAR at www.sedar.com. 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.

Well Test Results and Production Levels

Disclosure of well tests results in this news release should be considered preliminary until detailed pressure transient analysis and well-test interpretations have been completed. Hydrocarbons can be seen during the drilling of a well in numerous circumstances and do not necessarily indicate a commercial discovery or the presence of commercial hydrocarbons in a well. There is no representation by the Company that the disclosed well results included in this news release are necessarily indicative of long-term performance or ultimate recovery. As a result, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company or that such rates are indicative of future performance of the well.

In addition, reported production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this news release due to, among other factors, difficulties or interruptions encountered during the production of hydrocarbons.

Boe Conversion

The term "boe" is used in this news release. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of cubic feet to barrels is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In this news release, boe has been expressed using the Colombian conversion standard of 5.7 Mcf: 1 bbl required by the Colombian Ministry of Mines and Energy.

Definitions

SOURCE Frontera Energy Corporation

Related Links

http://www.fronteraenergy.ca