Frontera Energy Corp, which is backed by Catalyst Capital Group, has agreed to acquire a 36.36 percent ownership stake in Pacific Midstream Limited for a cash consideration of $225 million. The seller is International Finance Corp. Upon the closing of the deal, Frontera will own 100 percent of PML.
TORONTO, Oct. 16, 2017 /PRNewswire/ – 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.
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”.