Frontera Energy taps Citi to explore potential sale

Breaking News 11 April

Frontera Energy taps Citi to explore potential sale

Frontera Energy, a Toronto-based oil and gas company with operations in Latin America, has hired Citi to explore a potential sale, according to two sources familiar with the situation.

The Catalyst Capital Group-backed energy business has already received offers for the whole company and at least one for some of its blocks, a third and a fourth source said. Catalyst Capital is one of Canada's largest private equity companies with a diversified portfolio of investments, according to its website.

Frontera has interests in 31 exploration and production blocks in Colombia, Ecuador and Guyana. It also owns 96.55% of Puerto Bahía, a Colombian maritime liquid bulk and dry cargo terminal, and controls a 35% stake in the 146-mile Oleoducto de los Llanos Orientales pipeline.

Infralogic reported in November that Frontera was working with CIBC to study a potential divestment from Puerto Bahia. However, the CIBC-led mandate is not for a direct sale of the port facility but rather a capital raise seeking a co-investor to participate in the expansion of the facility to incorporate additional services such as container handling, according to the first and a fifth source familiar.

Last month, Frontera announced that its wholly-owned subsidiary Pipeline Investment Limited — which controls its stake in Puerto Bahía — secured a USD 120m loan from Macquarie Group's Commodities and Global Markets business to refinance the terminal’s debt.

Toronto-based Catalyst Capital owns about 40.84% of Frontera, according to financial filings. The private equity firm, which has raised more than USD 4.3bn through five funds, took over Frontera’s predecessor Pacific Rubiales in 2016 when Catalyst Capital provided it with a USD 500m debtor-in-possession loan.

Pacific Rubiales, co-founded by former executives of Venezuela’s Petroleos de Venezuela (PDVSA), entered bankruptcy proceedings in Canada in April 2016 in what was then the largest bankruptcy of an oil and gas producer in terms of debt.

Catalyst Capital has been trying to exit Frontera since at least 2022, according to the second and the third sources and a sixth source familiar. The election of Gustavo Petro as the president in Colombia in June 2022 led the PE firm to halt its potential exit, the sixth source said.

The government of Petro, a former guerilla member, announced in January it will not grant new oil and gas exploration contracts as it intends to shift away from fossil fuels. Colombia represented 98% of Frontera’s total oil and gas production last year, according to financial filings.

Companies already operating in Colombia such as GeoPark, Parex Resources, Gran Tierra and state-controlled Ecopetrol would be logical buyers, the third and a seventh source familiar said.

Frontera reported a net income of USD 286.6m in 2022, 54.2% less than in 2021, according to financial filings. The company has a market cap of CAD 1bn (USD 778.1m).

Frontera and Catalyst Capital Group declined to comment. CIBC and Citi did not respond to requests for comment.

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