Frontera Energy Corporation (OTCPK:FECCF) Q1 2023 Earnings Conference Call May 4, 2023 11:00 AM ET
Company Participants
Gabriel de Alba – Chairman
Orlando Cabrales – Chief Executive Officer
Rene Burgos – Chief Financial Officer
Victor Vega – Corporate Vice President, Field Development, Reservoir Management, and Exploration
Conference Call Participants
Oriana Covault – Balanz
Roman Rossi – Canaccord Genuity
Anne Milne – Bank of America
Christine Guerrero – Brickhouse Ventures
Luis Serrano – Goldman
Operator
Good morning. My name is [indiscernible], and I’ll be your conference facilitator today. Welcome to Frontera Energy First Quarter 2023 Operating Financial Results Conference Call. All lines are currently on mute to prevent any background noise. I would like to remind you that this conference call is being recorded today and is also available through our audio webcast on the company’s website.
Following the speakers’ remarks, there will be time for questions. Analysts and investors are reminded that any additional questions can be directed to the company at [email protected]. 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 quarter ended March 31, 2023, and the company’s annual information form dated March 1, 2023. Another document it files from time-to-time with securities regulatory authorities describe the risks and 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.
Gabriel de Alba
Thank you, operator. Good morning, and welcome to Frontera’s first quarter 2023 earnings call. Joining me on today’s call are Orlando Cabrales, Frontera’s CEO; and Rene Burgos, Frontera’s CFO. Also available to answer questions at the end of the call, we have Victor Vega, VP, Field Development, Reservoir Management and Exploration; Alejandra Bonilla, General Counsel, Ivan Arevalo, VP Operations; and Renata Campagnaro, VP Marketing, Logistics and Business Sustainability. Thank you for joining us.
The company delivered average daily production of 41,586 barrels per day, generated $91.9 million of operating EBITDA and invested $131.5 million in capital expenditures, in-line with its 2023 guidance. Consistent with the strategic focus of unlocking stand-alone value from our three businesses, upstream in Colombia and Ecuador, midstream with our port and pipelines and Guyana, the company successfully refinanced Puerto Bahia’s existing legacy project finance debt be a new 120 million loan facility with a group of lenders led by Macquarie Capital.
With this refinancing complete, Frontera’s standalone midstream business is fully capitalized and can operate and grow independently. The refinancing extended the tenor of the borrowings to December 2027 and provides for up to $30 million in additional funding to pursue strategic investment opportunities with the midstream business. Subsequent to the quarter-end, the company designated Frontera Energy Guyana Holdings LTD and Frontera Energy Guyana Corp as unrestricted subsidiaries and release Frontera Energy Guyana Corp as a note were on tour for its senior bonds due 2028.
The designation is a positive forward step as the company nears the completion of our two-well commitment in Guyana and supports ongoing capital discipline. Speaking of Guyana, I’m excited to confirm that Frontera and its joint venture partner, CGX, have encountered all bearing intervals at the Wei-1 well in the western channel fan complex, all of the northern portion of the current in block information of Maison and companion ages.
The current debt of the G1 well is 19,142 feet, and drilling is progressing towards the planned TD of 20,500 feet. Orlando will provide more details on Wei-1 in a few minutes. We remain committed to successfully and safely completing this potential transformational opportunity.
Finally, as you may have noticed beginning with last quarter disclosure documents, the company is committed to providing greater clarity and insight into its three core businesses to its quarterly results and press releases, financial statements, management discussion and analysis, including this conference call. You’ll hear more about this in a moment. As mentioned, the company remains focused on our locking value from its three core businesses, upstream, midstream, and Guyana to achieve strategic priorities and unlock shareholder value.
I’ll now turn the call over to Orlando Cabrales, Frontera’s CEO; and our CFO, Rene Burgos, who will share their views on Frontera’s first quarter results and the performance of our three core businesses. Orlando?
Orlando Cabrales
Thank you, Gabriel. Good morning, everyone. Thank you for taking – and thank you for taking the time to join us. I’m pleased with Frontera’s first quarter operational and financial results. Despite community blockades in early February, which temporarily shut in production at our Quifa and CPE-6 operations, the company’s third quarter production was largely in-line with the prior quarter.
Year-to-date, we are delivering average daily production of approximately 41,800 BOE per day. And so far, in the second quarter of the year, we have averaged approximately 42,500 BOE per day. Our first quarter average production and the strong production performance so far in the second quarter is a testament to the versality and robustness of our assets and our operations, teams hard work and dedication to quickly return production to pre-blockade levels.
Taking a closer look at our three core businesses. In our Colombia and Ecuador Upstream segment, we drilled 17 development wells at Quifa, Cajua, CPE-6 and Cubiro blocks, and we currently have 5 drilling rigs and 2 workover rigs active at our Quifa, CPE-6, Cubiro and Corcel/Guatiquia blocks in Colombia. We drilled 7 production wells at Quifa and 5 production wells at Cajua during the quarter.
As we have highlighted previously, increasing water handling capacity at Quifa is key to Frontera’s efforts to grow production. Our current water handling capacity at Quifa is approximately 1.5 million barrels of water per day. Earlier this year, we began commissioning SAARA, our reverse osmosis water treatment facility to process water from our Quifa block operations.
As of April of this year, the SAARA plant has already processed 1.5 million barrels of water as part of its commissioning program, providing irrigation source water to the company’s nearby ProAgrollanos palm oil plantation. I would note that every additional 100,000 barrels of water handled increases our net production at Quifa by 1,200 barrels per day.
At Cajua, the company drilled 5 horizontal wells in the first quarter, which increased gross average production to 3,873 barrels of oil per day of heavy crude in March. And current gross average production is 4,860 barrels of oil per day. We are also excited about the early success of our AICD program, a technology that has reduced water production per well by more than 50% in the 3 wells we tested on technology.
Turning now to our midstream Colombian business. The company’s midstream Colombia segment income was $16.9 million in the first quarter of the year. Puerto Bahia liquids terminal revenues increased by 10%, compared with the same period of 2022, with third-party volumes comprising 82% of total liquids terminal revenues. General cargo terminal revenues increased by 4%, compared with the same period in 2022.
We are maintaining a strong share of roll-off business and seeking potential growth in bulk and container opportunities. Proportional EBITDA for the midstream segment in Colombia for the first quarter of 2023 was $28.2 million.
Now our Guyana exploration business. On January 23, 2023 Frontera and CGX joint venture partners in the petroleum prospective license for the current in block offshore Guyana announced the spot of the Wei-1 well. To date, the well has been successfully drilled to a depth of 19,142 feet, and we anticipate reaching a total depth of 20,500 feet. The Wei-1 well is located approximately 14 kilometers northwest of the Joint Venture’s previous Kawa-1 light oil and condensate discovery.
The well has encountered oil-bearing intervals in the western channel fan complex of the northern portion of the Corentyne block in formations of Maastrichtian and Campanian ages. A comprehensive logging campaign in the Maastrichtian and Campanian intervals indicated the presence of oil, confirmed by downhole analysis. Logging while drilling and cuttings indicate the presence of hydrocarbons in the upper portion of the Santonian; fluid samples have not yet been fully obtained.
Side-wall core samples will be attempted in the Santonian interval when drilling resumes. Preliminary indications from the secondary targets in the Maastrichtian and Campanian are positive, however no assurance can be given that these activities will ultimately produce hydrocarbons in commercial quantities. While performing additional well logging and data acquisition operations, a wireline fluid sampling tool became stuck in the well and was not recovered. An open hole sidetrack will begin shortly from below the last casing point to the planned TD.
The Joint Ventures expects to complete Wei-1 operations within the original 4-5 month timeframe as announced on January 23, 2023. The JV has updated its well total cost estimates to $175 million to $190 million to successfully reach the target total depth, and complete its drilling program. The increase in cost includes the delays associated with the late arrival of the rig, and costs associated with fishing and sidetrack operations. As Gabriel mentioned in his opening remarks, we remain committed to successfully and safely completing this potentially transformational opportunity.
I would now like to turn the call over to Rene Burgos, Frontera’s CFO.
Rene Burgos
Thank you, Orlando. Thank you all for joining us today. I’d like to take a moment to highlight a few key financial aspects of our first quarter results. Operating EBITDA was approximately 92 million in the first quarter. This compares with 145 million in the prior quarter. The decrease in quarter-over-quarter operating EBITDA was primarily a result of lower commodity prices and lower sales volumes.
As of March 31, the company had a total inventory balance of 1.6 million barrels, an increase of 0.4 million barrels compared to December 31. The company actively manages its volumes, ending the quarter with more than 370,000 barrels of increased inventory as compared to the prior quarter, which was subsequently sold in the second quarter of 2023.
During the quarter, the company invested approximately 132 million in capital expenditures, including 75 million in CapEx related to Guyana, 3.5 million in debt service payments, and just over 4 million in share buybacks. In addition, the company obtained net proceeds from the PIL loan facility of $115 million, which were used to fully repay the Puerto Bahia legacy debt.
We had higher working capital in the quarter, largely due to higher withholding tax payments, resulting from the updated taxation. Payment of higher capital activities executed during 2022 and the additional Colombia, Ecuador oil inventory that I just mentioned. The company reported a total cash position of $183 million as of March 31, compared to 313 million as of December 31 close.
Turning to enhanced shareholder returns. As part of our 2023 plan, we continue pushing forward with our efforts to unlock our holder value from our upstream Colombia and Ecuador business, our stand-alone and growing midstream business and our potentially transformational offshore exploration program in Guyana. As Gabriel mentioned, during the quarter, we successfully refinanced Puerto as legacy project finance debt. This new financing extends the borrowing tenure by 3 years on a weighted basis.
Importantly, this credit agreement also includes additional flexibility, including an accordion feature for up to $30 million, which may be drawn by Puerto Bahia to fund additional investment opportunities, including potential liquids and dry terminal expansion projects. This financing was tailored to meet the business growth plans.
Furthermore, and consistent with the strategy, the new loan is supported exclusively by the cash flows from our midstream business. This financing is nonrecourse to Frontera. Subsequent to the quarter, Frontera announced he had designated Frontera Energy Guyana Holding Ltd and Frontera Energy Guyana Corporation as unrestricted subsidiaries in accordance with the terms and conditions of the indenture.
As a result of this destination as an unrestricted subsidiary from Data Energy Guyana Corporation automatically ceased to be a no guarantor pursuant to Section 7.12 of the inventory. In accordance with the indenture, the company utilizes available restricted payment capacity to affect the destination. I would highlight that since 2021, from data has generated in excess of 1 billion in consolidated net income as defined in the indenture, the capacity available under the restricted payment covenant was sufficient to undertake such as a niche transaction.
With respect to the Frontera Guyana transaction that I just highlighted, the company utilized the most recent available information, including the recent JOA amendment transaction involving Frontera CGX completed in the third quarter of 2022, as well as the most recently available information to determine the fair market value as required. As our Chairman highlighted, this destination is consistent with the company’s priorities and supports the ongoing capital discipline of the business.
With respect to the company’s NCIB, we repurchased approximately 500,000 shares of the company’s common shares for cancellation for approximately $4.2 million. In total, we repurchased 4.3 million common shares as part of our NCIB program that just recently ended on March 16. This number equates to roughly 89% of the program shares available for repurchase.
And finally, we would like to thank our investors for the ongoing questions and interest in our company. In response to these questions, we have included additional information this quarter that shall further add clarity with respect to important aspects of our businesses. Within our revenues and operating cost disclosures, you will find additional details about our crude purchases and their subsequent sales. These purchases are primarily linked to our [deal] [ph] activity as we blend our own production to reach this air quality for transport and export.
Second, we have added additional disclosure information related to our midstream business. This additional information is meant to provide a better understanding and visibility to our investors for this core business and includes certain non-IFRS measures such as proportional EBITDA measure. A reconciliation of these non-IFRS measures can be found in our MD&A. I would like to now turn it back the call to Orlando.
Orlando Cabrales
Thank you, Rene. Before I wrap up today’s call, I would like to take a moment to highlight some recent recognition Frontera has received for its commitment to ESG. On March 13, Frontera was recognized for a third straight year by Ethisphere, a global leader in defining and advancing the standards of ethical business practices as one of the 2023 World’s Most Ethical Companies.
In 2023, 135 honorees were recognized spanning 19 countries and 48 industries. Frontera was one of only two honorees in the oil and gas industry. On January 31, Frontera was included in the 2023 Bloomberg Gender Equality Index, a modified market capitalization-weighted index developed to gauge the performance of public companies dedicated to reporting gender-related data.
This reference index measures gender equality across five pillars: leadership and talent pipeline, equal pay and gender pay parity, inclusive culture, anti-sexual harassment policies, and external brand. Frontera was also recognized in the first quarter as a top 20 best place to work in Colombia by the Great Place to Work Institute and achieve ISO certification for its operations in Ecuador and its recognition for operations safety. It was also recognized by Friendly Biz for our LGBT+ friendly workplace.
Looking ahead to the second quarter, we expect improved profitability throughout the rest of the year as we advance our development portfolio in Colombia and Ecuador. We anticipate growth in our water handling infrastructure and facilities capacity in both Quifa and CPE-6 as we lay the foundation for the company’s path to grow production to 50,000 barrels per day. We will leverage our advantaged transportation and logistics structure to maximize realized prices. We will mature sell our self-sustaining and growing midstream business, and we will complete operations at the Wei-1 well in Guyana.
With that, I would like to conclude by saying thank you to Gabriel and Rene for the comments, and thank you for everyone for attending our call. I will now turn the call back to our operator who will open the call for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Your first question comes from Oriana Covault with Balanz. Please go ahead.
Oriana Covault
Hi, thanks for taking my question. This is Oriana Covault with Balanz. My first – I had a couple of questions, so we could go one by one, that would be great. Starting maybe with the revised cost for Wei-1. Just to understand the main catalysts that you see for cash generation? And how would you expect this additional cost on your remaining CapEx through the year? Do you remain of the view of it being fully funded with internal cash generation?
Orlando Cabrales
Hi, Oriana. As always thank you for participating. I think you had more than one question within that question. So, maybe we can break it down a little bit more. In our MD&A, you will find the recent breakdown, an updated breakdown related to the – our updated CapEx views. I guess I think what this translates to is roughly $10 million to $20 million in expenditures from what we have previously guided the market to. And I think I would point to what Orlando said that we are committed to finishing successfully and also finishing safely the drilling of their Wei-1 well. So, I’ll throw it back to you if there’s any particular – more detail questions you want me to answer.
Oriana Covault
Yes. Just thinking of the cash generation and the full CapEx program for the year, how do you see seeing that the cash burn during the first quarter? How much is it remaining in Guyana? And how do you expect to fund the remaining of your CapEx program through the year?
Rene Burgos
Got it. I think that we’ve highlighted to the market that we have our CapEx expectation, call it, I think, is $400 in $475 million depending on our ranges. What I would like to highlight there is that you talk about – because you’re talking about two different things, right? Funding Guyana, we are only one part of the JV association to Funding Guyana. So, we believe that we have sufficient capital to fund the required amount to fulfill the needs related to the well.
As it relates to our program, our guidance is that we will be able to fund the expectations of our guidance as we present it to the market. I’m a little bit – sorry, I can’t throw the question back to you a little bit, just confused by your question.
Orlando Cabrales
But I think the bottom line here, Oriana, is that we – I mean, as Rene said and as I said earlier, I mean, we remain committed to complete the well, and that is within our CapEx guidance.
Oriana Covault
Yes. Understood. Maybe just one final one, and it has to do with the wider differentials that you’ve seen across – for Colombia and crude oil. So, just to understand if you can share some views on what are you seeing that is driving this? And what are your expectations for the remainder of the year?
Rene Burgos
Look, I would say it’s two things. What we can highlight is that wider differentials in the first quarter, I think we’ve seen an easing of that. I think we’re seeing improved terms now. The – and I will highlight that the real reason driving that is the market that we live in today. I think that the Russia conflict, the different things that are happening globally are really driving a lot of volatility in these markets. I mean you’ve seen the recent price action related to oil today, despite what we believe to be a very title market. And this is – this type of volatility is driving a lot of those differences. But to clarify, I think that we’re now seeing a – the differentials have come down. We’ve seen an improved environment during the second quarter.
Orlando Cabrales
Yes. In the second quarter.
Oriana Covault
Got it. Thank you very much.
Operator
Your next question comes from Roman Rossi with Canaccord Genuity. Please go ahead.
Roman Rossi
Good morning, guys and thanks for taking the questions. So, just as a follow-up on Oriana’s question regarding Wei. Looking at this year’s financial statements, it seems they don’t have enough cash to fund their share, right. I just wanted to have any comments from you if you are having discussions around providing more financing or any, sort of financial support for this year?
Orlando Cabrales
Rom, thank you for the question. I mean we cannot – Frontera cannot comment on CGX plans. As we said, I mean, the JV remains committed to complete the world. But it’s difficult for us to make any comment on CGX’s plans.
Roman Rossi
Okay. Thank you. And just another question regarding the crude purchases. Even though the disclosures are better, I just wanted to ask you how should we think about through purchases going forward? Is there a way to project it?
Rene Burgos
And look, I think it’s a good thing that you asked that. So the – all these crude purchases are volume-driven. And all we’re trying to do, I think as I said in my remarks, this is the crude that we acquired, so that we can get our – you know that we’re mostly heavier oil company, we can take crude, get it to the desired spec, transported, and exported. So let us work with you and Brent and the team and maybe we can give you guys a little more clarity on the numbers that were presented with this digestible, that I would offer to just take it off-line and then we can help you kind of guide you with that.
Roman Rossi
Okay. Thank you very much Rene.
Operator
Your next question comes from Anne Milne with Bank of America. Please go ahead.
Anne Milne
Good morning. Thank you very much for the call. I also would like to thank you for the increased disclosure, which I noticed as I was going through your press release. That is very helpful. I have a few questions. One, I’m just wondering right now how you’re thinking with what you’re seeing in the Colombian market about the future prospects for the Puerto Bahia, the two terminals that you have there? And what types of growth rates, I guess, you could see?
The second question is on your water handling at Quifa. I think you said it’s at 1.5 million barrels a day. And I just want to confirm will this be growing this year? And how much will it be growing by? Third question, sorry, this is on taxes. Rene, I know you mentioned that was one of the reasons for the increase in working capital, but I also see that income taxes paid increase. Is all of the increase both in the taxes paid and working capital related to taxes, due to the new taxation that’s coming in?
And then I guess the final very, very general question is, first full quarter under the new government how are you looking at – what are you watching for in terms of new or additional decisions that might be made with respect to the oil sector? Nothing has been made so far. I know there’s been some blockades, but that’s not really directly. So, just wondering if there’s anything you’re watching out for particularly after the cabinet changes? Thank you.
Orlando Cabrales
So, on the – and a lot of questions, so please remind us if we – I don’t have a piece of people with me, so I didn’t take no, but I’m going to take from memory. And I think I drink my [indiscernible] this morning. So, I think I’m get – so on the Puerto Bahia, I think the – this is a port that was built in 2015 that we believe that has significant room to grow, both on the liquid side and also on the dry port side. As we think about volumes, I think that today, that port has significant volume capacity to transport additional liquids.
So, capturing that flow of additional liquids into Colombia will be critical for us to continue to grow that. Today, I think we’re roughly at close to 70,000 barrels a day of managed liquids, and this is up already from a number that was a couple of years ago, probably closer to the 40s. So, our focus now is to continue to increase that. And you can imagine that a port is also all about throughput because we earn money by actually flowing more oil through it, not just necessarily holding or storing the oil through the port.
So that’s one side. And we are looking at several strategic projects that can improve on that. On the other side, today, we have a really [Technical Difficulty] on the [rate side] [ph], I think we are the number 1 market share in the country related to this roll-off cargo. But I think that, that is one aspect of the business that remains to be underutilized. We have several hectors of expansion capability for the port for us to kind of target.
Second, we’re looking at potential expansion into the container port business and all of these together, better use of our existing land, better use of our capabilities to have stacking capabilities related to management or cargo should be key drivers of a potential and potential drivers for additional profitability over Puerto Bahia.
Does that answer at least your question and maybe one thing that we can do Anne is, we can walk you through our presentation of the port and kind of highlight and pinpoint in particular detail where we see that expansion, how much capacity and volumes because we certainly have that prepared and we’ll gladly share that with you.
Anne Milne
Okay. Yes. Just to say anything that you think will be in 2023 important growth there. That’s all.
Rene Burgos
Yes. So, 2023, I think it’s more organic growth. I think some of the strategic projects we hope that we will be able to tap in 2023. We’re focused on tapping those. But right now, I think most of the growth you’ll see is from continuing to capture more market share from existing players, continue to realign our ports, so we can capture more cargo and also more liquids flows.
Anne Milne
Okay, perfect. Thank you, Rene.
Rene Burgos
Then on the taxes, I would say two things, and let me just make sure that I got the right number. So, the – on the withholding tax number is there was a recent regulation that increased withholding taxes by an additional 5%. So, you’re seeing basically that incremental amount. So that’s where you see the value of our certain tax assets increasing. This is effectively the side effect of the recent regulations where you have the government increasing the total take by the non-deductibility of royalties and also [deferred tax] [ph].
So, I guess, to answer your question, our guidance related to taxes to be paid at the end of the year remains to be the same because our tax is payable. However, now we are being withheld a higher amount that we would expect to get – basically get returned by the end of the year because of overall retention.
Anne Milne
Okay, got it. Thank you.
Orlando Cabrales
And on the project, on the water handling capacity increase that we are – I mean, currently, as we speak, working at CPE-6 and at Quifa, yes, certainly, the idea will be to increase that capacity. For CPE-6, the project that we have is to double the ware-handling capacity of the field, which is today in 120,000 barrels of oil per day. So, we are expecting to double that by the end of the year. That is a project that goes into in stages, but we are on-track with that project. And with Quifa, as I mentioned, the pilot for the SAARA facility, which was a facility that was completed like 6, 8 years ago.
We are commissioning that facility as we speak. The pilot has been very successful. We have treated already 1.4 million barrels per quarter. So, we are on-track. We are also on track with the plan to increase capacity in that facility. And I think your question about the – if I understood it correctly, it’s about the plants in Colombia going forward with the [indiscernible] in the cabinet. Is that your question?
Anne Milne
Yes. And any other actions by the government or what you’re watching out for that would maybe change your strategy?
Orlando Cabrales
Yes. No, we – I mean, we remain committed to our operations in Colombia. I mean we are aware that [President Petro] [ph] has a narrative, which is a bit anti-oil to put it away. But the new Minister of Finance in the first statement that he made to the media in Colombia, he’s fully supportive of the oil and gas industry is fully aware of the importance of the oil and gas industry for the Colombian economy. And so his statements are very comfortable for us, I mean, to continue with the – with our operations in the country.
Orlando Cabrales
Thank you. And to my top-notch team gave me some more details, and I know that you have details on the taxes. So, I will clarify a couple of things. So, we went from $16 million to $36 million. There is a $7 million payment related to withholding taxes, and this is timing driven on ODL and the ODL pipelines. So then the – remember, before prior to this year, we also only own 60% of that another remaining 40%. You see an increase there because we consolidate the investment, so we paid the tax on those dividends.
The other one, I would say, we have a $15.6 million payment related to – and this is the increased taxes that I was telling you about versus last year, I think it’s 16 this year, you’ve already seen that number being a little higher. And there is one correction of $30 million there that we were – is a settlement that we did to catch up with some taxes that were owned as of 2022. So, I would say 13 of that $36 million, it’s one-time, and the other stuff is more one ODL 5.4 land the other one is the increased number driven by the retention.
Anne Milne
Okay, very helpful. Thank you.
Operator
Your next question comes from Christine Guerrero with Brickhouse Ventures. Please go ahead.
Christine Guerrero
Yes. Great quarter, guys, and it’s wonderful to hear the well progressing being a complicated well. Most of my questions are regarding Guyana and the well results. And then I have a housekeeping question at the end. So, to start out, it’s a pleasant surprise, finding oil in the Maastrichtian and the Campanian. Does that seem to align way the wave results more with the [indiscernible]. Also, you announced the API for the Maastrichtian, but there was a lack of that clarity around the Campanian. I wanted to know why that? And since there was no information provided on the net pay, the porosity or the prospect size and the Maastrichtian and the Campanian targets. I was hoping you could provide some more clarity around that.
Rene Burgos
Victor, do you want to take that question, Victor?
Victor Vega
Sure. [indiscernible] I think the first thing I would like to say is thanks for your question. In that so far, we are pretty happy with the we have seen our geological and geopolitical models are proving to be quite accurate, and we are very encouraged with the results of the well. And also to point that we have also already acquired a lot more data than we did in [indiscernible]. So the first part of the question – or the answer to your question that I would make.
Second one is basically in regards to your questions about the oil in Maastrichtian and Campanian and more like [indiscernible] or Block 58. Basically, the point is, in there is that we are still analyzing the data. When we released was the information that we have so far. And whilst we get the get [CPE-6] [ph] and the well, and we are able to analyze the data, we will make some more – really more information about this, right? But basically, we are encouraged and then we are going to analyze the information and integrated.
In terms of your questions about the API, [indiscernible] in the Maastrichtian and in the Campanian as we indicated in the press release, basically, we were able to collect the [indiscernible] in the attrition because the problem that we had with the MBT2 was actually when we were in the lower horizons, which were the reason why we did not increase any information.
Now around the prospect side, I will also reiterate that we need all the information from the well. So, we are waiting to get all the different efficiency of the puzzle, right, including the wireline information NBP, the same workforce, which we hope to also be able to get in the next part of the well and then that integration should allow us to be able to get a better picture of what we have found so far.
Christine Guerrero
Okay. So, just to clarify, does that mean that you didn’t get any of the fluid samples in the Q – Campanian or the Santonian before the tool got stuck?
Victor Vega
We were able to collect [indiscernible] the tool was not recovered, so we have the digital information from the tool – for the samples that we collected, but we did not get basically the samples, okay? So, we have information from the wellbore or from the tool itself that was transmitted to surface, but we did not get the same comfort to the destock, okay?
Christine Guerrero
Okay. Yes, perfect. That answers my question. So, also so far on your drilling, how closely is Wei-1 aligning to your predrill seismic modeling? Are the sand packages coming in larger, smaller? I mean can you give some color around that?
Victor Vega
Yes. Basically, what I can tell you is, what I explained before, right, that basically, we are pretty close. And again, we are not releasing yet information about thickness or anything like that because we want to do one thing we release at the end after we are able to integrate the data so that we are able to put a comprehensive picture for everyone. But basically the plan, so far, we have seen what we have in the plan in terms of the [indiscernible].
Christine Guerrero
Okay. So, at the end, how long will it take to complete the prospective resource update?
Victor Vega
Yes. Well, we said at first, we are going to stick to 4 to 5 months to get to the end of the well and get all of that. And then after that, Christine, we will have to wait to see how much data we are going to be able to collect and how long that’s going to take for the analysis. So, I think we will have to wait until we have the data and we understand how long it is going to take, right? As you know, some of the [PBT] [ph] analysis, and some of this is going to take a little bit of time. So, we will have to assess that and [indiscernible].
Christine Guerrero
Okay. And so also considering that Wei-1 is kind of remaining within the original time line of 4 to 5 months, it seems like the cost has increased significantly. What’s the primary cause of that miscalculation? I mean, is it that there were some inflationary causes in the rig contract or some other hidden factor because it seems to be more than just the stuff logging tool.
Orlando Cabrales
Actually, — let me just clarify there. The real issue here was the delay. We were ready – we were ready by September to start drilling. We had everything lined up, including support. We are paying field. We’re paying a lot of support equipment waiting for the drill to come. So, we’re seeing that roughly $20 million of that increase is delay driven 100%. So the – if you were to adjust that back, this well, including the additional costs that we’re under – we’re going through right now as disclosed in the release for the additional activity would actually be under Kawa-1. But yes, the overall CapEx is bigger because of the delay in receiving the [indiscernible].
Christine Guerrero
Okay. So, that’s like a lot of standby charges and things like that?
Orlando Cabrales
Basic [indiscernible] fuel and these things just tend to add up. We were at the ready as we told the government, and we told every investor by September and the drilling, start drilling until January.
Christine Guerrero
Okay. Okay. Yes. Thank you. That makes sense because the well cost misalignment, like I said, it just wasn’t factoring to me. But if there’s – like you said, there’s a bunch of standby charges because of the rig mobilization, then that definitely clears that up. [Multiple Speakers] I mean, yes, it’s part of working in a remote region until the Berbice Deepwater Port is scheduled. I mean, I know there’s like limited port support in the area and you’re transferring back and forth from Trinidad. So yes, the Berbice Port being open, which I don’t know if you can comment on that. Like when is CGX’s Berbice Port considering that you’re the largest shareholder and also on the Board of CGX Energy, like when is that ports expected to open?
Orlando Cabrales
We will defer that question to CGX.
Christine Guerrero
Okay. So here’s one that you may or may not answer as well. So, earlier this year, it was reported by a third-party that Frontera has received multiple offers for a corporate buyout and at least one offer for the Guyana asset. Have you received any further offers since your last report? And are there currently any negotiations ongoing?
Orlando Cabrales
Well, I mean, as a matter of – I mean, company policy, we don’t – I mean, we don’t comment on market speculation and rumors. I mean, having said that, we are always – I mean, looking for M&A opportunities to enhance the value for all of our stakeholders. And would consider M&A opportunities if it makes sense to do so. Just as an example, remember, we increased our indirect interest in the ODL pipeline in September of last year.
We increased our working interest in the current time block last year as well. We acquired PetroSud company in Colombia by the end of 2021. So very, very – I mean, looking actively into M&A opportunities that, again, I mean, may make sense for our stakeholders.
Christine Guerrero
Yes, that’s fair. Thank you so much for taking my question.
Operator
[Operator Instructions] Your next question comes from Luis Serrano with Goldman. Please go ahead.
Luis Serrano
Hi guys. Thank you for the call. Just a very quick one from my end. Can you comment on what the remaining capacity under your RP basket is after the change in the inventory that you just did?
Orlando Cabrales
Sorry, we – there was no change in the indenture. You mean the designation?
Luis Serrano
The designation, yes. So essentially, just what’s your RP – your current RP capacity?
Orlando Cabrales
Look, I need to get back to you on that. But what I can tell you, and I think I mentioned in my notes, the company generated over $1 billion of consolidated net income since 2021, which is the date on the likes on the indenture. In addition to that, you have we paid roughly – last year, we did SIB’s around $92 million and [SIB $92 million] [ph] year before, we acquired shares for about $40 million. And I think this transaction, even with this transaction, we still have capacity under the restricted payments basket. So, I think that’s – think the information that we’re going to disclose at this point.
Luis Serrano
Yeah, understood. Thank you.
Operator
There are no further questions at this time. Please proceed.
Orlando Cabrales
Thank you, Operator. Thank you, everyone, to take the call and take it at the time today.
Operator
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Read the full article here
