Frontera Energy Corporation (FEC) Earnings Call Transcript & Summary

Good morning. My name is Vincent and I'll be your conference facilitator today. Welcome to Frontera Energy's second quarter 2026 operating and financial results conference call. [Operator Instructions] I would like to remind you that this conference call is being recorded today and is also available through an audio webcast. [Operator Instructions] Analysts and investors are reminded that any additional questions can be directed to Frontera following today's call at ir@fronterainfrastructure.ca. This call contains forward-looking information within the meaning of applicable Canadian securities laws relating to activities, events, or developments the company believes or expects will or may occur in the future. Forward-looking information reflects the current expectations, assumptions, and beliefs of the company based on information currently available to it. Although the company believes the assumptions are reasonable, forward-looking information is not a guarantee of future performance. Forward-looking information is 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 information. The company's MD&A for the 3 and 6 months ended June 30, 2026, and the company's annual information form, and other documents it files from time to time with securities regulatory authorities describe the risks, uncertainties, material assumptions, and other factors that could influence actual results. Any forward-looking information speaks only as of the date on which it is made, and the company disclaims any intent or obligation to update any forward-looking information except as required by law. I would now like to turn the call over to Mr. Gabriel de Alba, Chairman of the Board of Frontera Energy. Mr. de Alba?

Thank you, operator. Good morning, everyone, and welcome to Frontera's second quarter 2026 operating and financial results conference call. Joining me today are Orlando Cabrales, Frontera's CEO, and Andres Sarmiento, Frontera's CFO. Also available to answer questions at the end of the call are Alejandra Bonilla, our General Counsel, and Renata Campagnaro, our Vice President of Commercial and Projects. Thank you all for joining us. This quarter marked an important turning point for Frontera. On June 1, 2026, we completed the plan of arrangement with Parex Resources. With the completion of the Parex transaction, CAD 8.34 per share was returned to our shareholders, an important realization of value and the culmination of a multiyear effort to simplify the company, unlock value for our shareholders, and establish a stronger foundation for Frontera's next chapter. Frontera today is a fundamentally different company, simpler and focused on infrastructure, with resilient, cash-generating assets, leverage below 1x adjusted EBITDA, and a differentiated growth opportunity through LNG at Puerto Bahia. Together, this positioned the company to be a meaningful player in Colombia's energy security. With that transformation now complete, the Board's mandate is equally clear: focus on growth, execute, allocate capital with discipline, and create long-term value for our shareholders. As we move forward, we will continue to evaluate investments and financing decisions against clear risk-adjusted return criteria while maintaining balance sheet discipline and a strong focus on long-term shareholder value. We also made important progress during the quarter on the next phase of Puerto Bahia's development. The take-or-pay agreement with Ecopetrol, together with the floating storage and regasification unit capacity secured with Excelerate Energy, these are substantial advances that put forward the commercial and technical foundation of our LNG regasification project. Our focus now is execution, delivering the milestones required to achieve first gas in early 2027, continuing to grow our existing port business, and operating our assets safely and efficiently. With that, I'd now like to turn the call over to Orlando Cabrales, Frontera's CEO, and Andres Sarmiento, Frontera's CFO, who will take you through our second quarter results in greater detail. Orlando?

Thank you, Gabriel. Good morning, everyone, and thank you for joining us for today's call. Our second quarter results reflect the successful completion of our multiyear transformation and the solid underlying performance of our infrastructure assets. Let me start with Puerto Bahia. Port revenues were $14.6 million in the second quarter, compared with $12.7 million in the prior quarter and $11.3 million in the second quarter of 2025. Puerto Bahia has established itself as a key strategic partner to the automotive sector in Colombia, with RoRo cargo volumes up approximately 85% year over year and 26% quarter over quarter. April 2026 established a new all-time record, handling 17,200 units in a single month, reflecting the strong underlying demand momentum, while LPG volumes continue to ramp up during the quarter. Turning to our ODL pipeline investment, we received $26.8 million in ODL dividends during the second quarter of 2025 (sic) [ 2026 ]. During the quarter, ODL declared an additional return of capital of $5.2 million. On our LNG regasification project, Puerto Bahia has entered into a 7-year take-or-pay agreement with Ecopetrol to provide integrated logistics and LNG regasification services in Cartagena. The agreement will be developed in 2 phases, with an initial 2-year regasification capacity of 126 million cubic feet per day starting in 2027, increasing to 300 million cubic feet per day thereafter. To fulfill the contract, Puerto Bahia has also contracted with Excelerate Energy for the lease of a floating storage and regasification unit for an initial term of 7 years, extendable for an additional 5 to 8 years. I would now like to turn the call over to Andres Sarmiento, Frontera's CFO.

Thank you, Orlando and Gabriel. And good morning, everybody. Thank you, as always, for your interest and support for the company. I'd like to take a moment to highlight a few key financial aspects of our second quarter results. For the second quarter, the company recorded an adjusted EBITDA of $30.5 million compared to $28.5 million in the prior quarter and $25.9 million in the second quarter of 2025, representing 18% growth year over year. Cash provided by operating activities from continuing operations was $26 million in the quarter, compared to cash used of $5 million in the prior quarter and cash used of $6.6 million in the second quarter of 2025. Turning now to our balance sheet and liquidity. As at June 30, 2026, the company had a total cash balance of $56.3 million. Net debt was $114.2 million, down from $123.7 million at December 31, 2025, and our net debt to adjusted EBITDA ratio improved to 0.98x compared to 1.35x a year ago. Last 12 months, the distributable cash flow was $78.8 million as of June 30, 2026, compared to $21.4 million at March 31, 2026, and $71.4 million a year ago. On capital allocation, we returned CAD 8.34 per common share to shareholders on June 23, 2026, in connection. [Audio Gap] of the Parex arrangement. Capital expenditures from continuing operations were $1.5 million for the quarter and $2.5 million for the 6 months. During the quarter, investments in Puerto Bahia included $0.5 million towards the LPG project and $0.2 million towards the LNG project. To support the LNG project, Bancolombia approved a $30 million loan facility to Puerto Bahia, of which $10 million were [Audio Gap] 2026 with an additional $20 million disbursement made subsequent to quarter end on July 2026. Proceeds are being used for advances to suppliers of the LNG project. Also, subsequent to quarter end, the company entered into a letter of credit facility agreement with Macquarie Bank Limited for up to $12.6 million as security for our obligations under the FSRU International Leasing Agreement and Operation Service Agreement with Excelerate Energy. I would now like to turn the call back over to Orlando.