Frontera Energy Corporation (FECCF) Q2 2023 Earnings Call Transcript

Frontera Energy Corporation (OTCPK:FECCF) Q2 2023 Earnings Call Transcript August 11, 2023 11:00 AM ET

Company Participants

Gabriel de Alba – Chairman

Orlando Cabrales – CEO

Rene Burgos – CFO

Conference Call Participants

Anne Milne – Bank of America

Roman Rossi – Canaccord Genuity

Jacob Steinfeld – Ashmore

Oriana Covault – Balanz

Christine Guerrero – Brickhouse Ventures

Operator

Good morning. My name is Sergio and I’ll be your conference operator today. Welcome to Frontera Energy’s Second Quarter 2023 Operating and Financial Results Conference Call. [Operator Instructions] I would now like to remind you that this conference call is being recorded today and is also available through audio webcast on the company’s website. There will be a time for questions following the speaker’s remarks. 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 security 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 several 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 June 30, 2023, and the company’s annual information form dated March 1, 2023, and other documents filed 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 dated and 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 you may begin your conference.

Gabriel de Alba

Thank you, operator. Good morning, everyone, and welcome to Frontera’s Second 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.

Frontera continued to efficiently execute its financial, operating and strategic plan in the second quarter for its three core businesses. In the company’s Colombia and Ecuador upstream onshore business, production, cost, operating EBITDA and CapEx are within 2023 guidance at $80 per barrel average Brent prices for the year.

In its potentially transformational Guyana exploration business, Frontera and joint venture partner, CGX Energy, safely concluded its planned two-well exploration program for the current time block and announced an oil discovery at Wei-1 well offshore Guyana. With the conclusion of the drilling campaign for Wei-1, the joint venture has complied with its exploration commitments under the current time petroleum prospecting license. Wei-1 is the second discovery in the Corentyne block, following the Kawa-1 light oil condensated discovery in 2022.

In its standalone and growing Colombia Midstream business, I’d like to take a moment to discuss an important development in the company’s efforts to unlock value of the sum of its parts. As you likely saw in Frontera’s earnings release last night, subsequent to the quarter for Puerto Bahia, entered into an agreement to connect the Puerto Bahia liquids terminal in Cartagena with Ecopetrol’s Cartagena refinery known as Reficar. Puerto Bahia will build, operate and maintain the 6.8 kilometer, 18-inch, bidirectional hydrocarbon floor line, which will have a normal capacity of 84,000 barrels per day.

The connection will be capable of handling important and domestically produced crude and other hydrocarbons. The agreement is the result of many years of effort by the team and marks a significant milestone for the continued development of the Cartagena base as a strategic activity hub for Colombia. And Frontera’s excited about its strategic project with Reficar and for the future of its growing and standalone midstream business. Frontera remains committed to generating even more value for shareholders by unlocking the [some of its parts] (ph).

I will now turn the call over to Orlando Cabrales, Frontera’s CEO, and our CFO, Rene Burgos, who will share their views on Frontera’s second quarter results and the performance of our three core businesses. Orlando?

Orlando Cabrales

[Foreign Language] Good morning, everyone. Frontera delivered positive second quarter results. We increased our average daily production by 1% to approximately 42,000 BOE per day for the quarter as we successfully brought production back online following the resolution of third-party road blockades that occurred during the first quarter, and increased water handling capacity at Quifa and CPE-6, where production improved 8.4%. We also grew natural gas liquid production by 41% to approximately 1,800 BOE per day through increased gasoline reinjection at VIM-1.

At CPE-6, we recently achieved daily record production of 6,177 barrels per day. We deployed approximately $155 million in capital spending, primarily to drill 19 development wells at Quifa, CPE-6 and Cubiro, improve flow lines, build a storage tank and other facilities to double water handling capacity at CPE-6, drill two exploration wells in Colombia and complete Wei-1 exploration drilling activity.

Taking a closer look at our three core businesses. In our Colombia and Ecuador upstream business, Frontera produced 41,436 BOE per day from its Colombian operations. We drilled 19 development wells in the second quarter at Quifa, CPE-6 and Cubiro blocks and one injector well at the CPE-6 block. And we currently have two drilling rigs, one workover rig active at our Quifa CPE-6 and Corcel/Guatiquia blocks in Colombia. Production from Quifa and Cajua fields average approximately 18,408 barrels per day of heavy crude in the quarter, up 9.4% compared to the first quarter. The company drilled 12 production wells, including seven wells at Quifa and five wells at Cajua in the quarter.

As I have mentioned before, increasing water handling capacity is key to Frontera’s airports to grow production at Quifa, where our current water handling capacity is approximately 1.6 million barrels of water per day. In 2023, we began commissioning SAAR, our reverse osmosis water treatment facility with an estimated 1 million barrels of water per day nameplate capacity. Every additional 100,000 barrels of water [100, 100] (ph) increases our net production at Quifa by 1,200 barrels per day.

As of July of this year, the plan has processed 7.6 million barrels of water as part of its commissioning program. This is a fivefold increase in treated volumes compared to April of this year, provided irrigation source water to the company’s nearby ProAgrollanos palm oil plantation.

In Ecuador, Frontera’s share of production was 613 barrels per day of medium crude oil for the three months ended June 30 compared to 1,005 barrels in the prior quarter. On the Frontera-operated Perico block, we drilled the G2 appraisal well in July, discovering 48 feet of net pay in the Lower U sand and 24 feet net pay in the Hollin main formation. The well has been successfully completed with initial production rates of approximately 1,200 barrels or 30.5-degree API crude oil. Pre-activities and civil works are underway in advance of drilling the Jandiayacu exploration well, which the company expects to start this month.

Turning now to our midstream Colombian business. We continue our efforts to unlock shareholder value from our three core businesses. Building on Gabriel’s earlier comments about the connection agreement between Puerto Bahia, Reficar, I will add that construction of the connection is expected to begin in the second half of this year and take approximately 12 to 18 months to complete a unanticipated total cost of approximately $30 million. The connection will enhance Puerto Bahia’s position as a strategic infrastructure asset and deliver additional revenue generation opportunities not only for Puerto Bahia, Reficar, but also for the local communities of Baru and Cartagena and [indiscernible]. I would like to thank our partners at Reficar and Ecopetrol for their dedication to completing the connection agreement with us and look forward to exploring the full potential of the connection in the coming months and years.

Regarding our midstream business results, total ODL volumes pump were approximately 243,000 barrels per day in the second quarter, up 8% compared to the first quarter. Puerto Bahia liquid volumes were approximately 74,000 barrels per day during the second quarter of the year, up 17% compared to the first quarter. Adjusted midstream EBITDA in the second quarter was $30 million compared with $28.2 million in the first year. The increased quarter-over-quarter was driven by both hydro volumes transported through ODL and higher throughput volumes in Puerto Bahia Liquids or Brazil.

Now our Guyana Exploration business. As Gabriel mentioned, and as you are all aware, during the quarter, Frontera and CGX announced that the joint venture discovered 210 feet of hydrocarbon bearing sands in the Santonian horizon, confirmed by wireline logs and extensive core samples. The rock and fluid properties of the Santonian are currently being analyzed by independent third-party laboratory to define net pay and a basis for the evaluation of this interval.

The JV also updated its previously announced discovery in the Maastrichtian and the Campanian intervals to 77 feet of net pay. Few examples were retrieved from the Campanian and Maastrichtian indicate the presence of light crudes in the Campanian and sweet medium crude oil in the Maastrichtian. The JV data acquisition program included wireline logging, MDT fluid samples and sidewall cores throughout the various intervals.

Over the next two months, results will be integrated into the geologic and geophysical models to form an updated view of the entire northern portion of the Corentyne block. The northern portion of the Corentyne block includes the channel complexes discovered by the Kawa-1 and Wei-1 wells and a prospective central channel complex, which is yet to be evaluated. The JV is excited by the definite presence of oil in Maastrichtian and Campanian and the presence of hydrocarbons in the Santonian and believe there is a significant potential in the block.

Speaking of Guyana, subsequent to the quarter, Frontera CGX entered into an agreement to amend the Corentyne block JOE between the companies to cover the unexpected additional cost of the Wei-1 well due to delays associated with the release of the rig by a third party, costs associated with a lost sampling tool and the drilling of the bypass well. As a result of this agreement, if the maximum amount is transferred by CGX, the company will have 72.7% participating interest and CGX will have a 27.3% participating interest in the block.

I would now like to turn the call over to Rene Burgos, Frontera’s CFO. Rene?

Rene Burgos

Thank you, Orlando. Also thank you very much, Gabriel, for the introduction, and good morning, everybody. Thank you for participating, for the interest in our company and for your ongoing support. I’d like to take a moment to highlight a few key financial aspects of our second quarter results.

In the second quarter, the company recorded net income of roughly $80 million, which compares with a net loss of $11.3 million in the prior quarter. The company’s second quarter net income included $35.5 million of a net recovery from asset retirement obligations and impairment expenses, resulting mainly from the company’s sale of its interest and asset in the Z1 block and the corresponding reduction in asset retirement obligations related to such block. A $14.3 million in income from associates related to our interest in the ODL pipeline, a $17 million foreign exchange gain, including a $9 million realized gain related to our FX management program. These were partially offset by finance and income tax expenses of approximately $18.4 million.

Operating EBITDA for the quarter was $116.5 million compared to $92 million in the first quarter. This represents a 27% increase in quarter-over-quarter operating EBITDA, primarily as a result of higher sales volumes during the quarter and the realized gain on our asset risk management contract.

The company continues to actively manage its inventories in Colombia and expects to continue to benefit from an improved differential environment going forward. As at June 30, the company had a total inventory balance of approximately 1.4 million barrels, including roughly 900,000 barrels in Colombia. This represents a decrease of around 200,000 barrels compared to Q1.

On the cost side, production and transportation cost per barrel totaled approximately $14 and $11.40, respectively. This compares to $12 and $11.20 in the first quarter. The increase in costs quarter-over-quarter was primarily a result of foreign exchange impact related to the almost 10% appreciation of the Colombian peso during the quarter, also impacting higher energy and internal transportation costs and additional costs related to additional activity for services.

I would like to provide a refresher on our cost exposure to the Colombian peso. About 75% of our OpEx and 30% of our transportation costs are denominated in Colombian peso. As I mentioned earlier, the Colombian peso appreciated 10% during the quarter. Since then and through today, we have depreciated another 4%. The company has a top-down focus on cost control, and this includes ongoing review for the prioritization of activities and further engagement enact saving measures as well as a disciplined hedging program to help mitigate this impact on a fluctuation. I will review key details of our hedging program shortly.

Cash generation for the quarter was strong with cash from operations totaling $184 million compared with approximately $1 million in the prior quarter. The increase in quarter-over-quarter cash provided by operating activities was primarily due to higher production, higher sales volumes including inventory sales and realized foreign exchange gains, partially offset by lower Brent oil prices. From an investment standpoint, the company spent $154.9 million in capital expenditures during the second quarter, including $72.8 million related to the Guyana Wei-1 exploration law. Additionally, the company spent $26.3 million in debt services.

I would like to take a second to give you a quick update on our investments related to our potential transformation of Guyana exploration program. We expect to be in the lower end of the capital guidance of approximately $190 million to $195 million. And as of the end of the second quarter, the expected additional cash outlays are estimated at around $40 million to $50 million.

As of the second quarter, the company reported a total cash position of $214 million compared to $183 million as of the first quarter of 2023. The company finished with a strong balance sheet and healthy credit measures, including low LTM net leverage of 0.5 times. I would like to highlight, during the quarter, the company borrowed $20 million on their new working capital facility loan. This facility matures by December of this year. This working capital is an important milestone for the company as it marks the first time that the company has successfully gained access to traditional bank funding markets in an effort to optimize its sources of capital funding.

Lastly, I would like to also give you an update on our risk management strategy. Frontera uses derivative instruments to manage exposure to oil price and foreign exchange volatility, consistent with the strategy the company entered into new put edges totaling roughly 2.1 million barrels or roughly 40% of our production for the year, and this will help protect a portion of the company’s production through November at prices between $70 and $79 per Brent barrel.

Frontera has also entered into foreign exchange rate hedges totaling roughly $120 million or approximately 40% of our estimated peso exposure for the second half of 2023. We used zero-cost dollars that protect the company at the COP4,300 level to — with a price cap above the COP4,900 level rate. We believe these provide the company with visibility and help mitigate future fluctuations and allow the business to deliver on its targets.

I would now like to turn the call back to Orlando for his closing remarks.

Orlando Cabrales

Thank you, Rene. And before I wrap up today’s call, who I would like to highlight that during the quarter, we released our 2022 sustainability report. We also announced that the company achieved 102% of its 2022 ESG goals. In 2022, we invested in 218 projects that benefit more than 73,100 people in Colombia, Ecuador and Peru. We offset 52% of our greenhouse gas emissions. We reduced water consumption at our operations by 15%, we achieved a total recordable injury rate of 0.82 at our operation, and this is the best health and safety performance in Frontera’s history. I’m incredibly proud of the entire Frontera team for their dedication to safe operations.

For 2023, we have set ambitious ESG targets. We aim to neutralize 50% of our greenhouse gas emissions through carbon credits. We plan to elaborate our first solar farm at CP6. We will continue commissioning our SAARA water treatment facility at Quifa and we aim to recycle 15% of our operational water use. And we aim to preserve an additional 1,000 hectares of biological corridors in Casanare and Meta. With that, I would like to conclude by saying thank you to Gabriel and Rene for their comments, and thank you, everyone, for attending our call.

I would now turn the call the call back to our operator. We will open the call up for questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Anne Milne from Bank of America. Please go ahead.

Anne Milne

Good morning, good afternoon. Thank you very much for the call and congratulations on good results. My first question has to do with the linking of the Puerto Bahia liquids terminal with Reficar. Congratulations. I think that’s something you’ve been focused on for a long time. My question is, is there any commitment on the part of Reficar or Ecopetrol to use this in any capacity? Or will you be looking for contracts from third parties? That’s my first question. I don’t know if you want to answer that, and I have two others.

Orlando Cabrales

Why don’t you go ahead with the other ones?

Anne Milne

Okay. So the second question is, I just didn’t get all of the information when you talked about the water treatment capacity, particularly at Quifa. I think you said that for every 100,000 additional, I want to say, is it barrels or gallons of water treatment, you can increase oil production by 1,200 barrels per day. And I think you might have already achieved something there. So I just wanted a little bit of clarification on that. And then the third question is just on Guyana. I know you said you’re currently evaluating all the results that you have. What are the different options after two months? Is it possible that you will make additional investments there? Or are there a variety of options you’re looking at?

Orlando Cabrales

Okay. Let me start. Thank you for the questions. Let me start with the first one in addressing the Puerto Bahia connection with Reficar. Well, as I mentioned, this is a significant value creation opportunity for the company. So we are very excited about that. We still have a 12 to 18 months to go to build the pipeline that connects the two facilities. There is a growing opportunity given the expansion of the refinery in Cartagena, which will need additional volumes to be refined in the facility. There is a take-and-pay agreement. Rates have been already negotiated. And again, these are very exciting opportunity. These are significant value creation opportunity for the company.

On the second question, yes, it’s every 100,000 of water that we can handle in the SAARA facility, there is an increase of 1,200 barrels net production. So that is another net for Frontera, 1,200 barrels per day. So every 100,000 implies 1,200. So that is all from there on a net basis. The facility as it is designed is going to benefit Quifa, the Quifa situation, but also the real depreciation that we are experiencing. But at the end, the benefit for Frontera is 1,200.

And I think the third question was about Guyana. Yes, as we mentioned, we are in the process of finalizing all the information that we got from the well. It is very positive, but we got significant new additional data from the well. And as we move forward, we, of course, will consider different strategic options as we have indicated before for the Corentyne license.

Anne Milne

Okay, great. Thank you.

Operator

Thank you. Your next question comes from Roman Rossi Lores from Canaccord Genuity. Please go ahead.

Roman Rossi

Good morning. Thanks for taking my questions. And, congratulations on the deals you closed this quarter. I have a couple just on [indiscernible]. I see that you changed your CapEx guidance to assume this just related to the channel, right? And then the second one is related to the pending technical information for the well. What are you expecting to have the net pay for the primary target?

Orlando Cabrales

Can you repeat your first question? The first part of the CapEx.

Roman Rossi

Yeah, because it seems you changed your CapEx guidance for 2023, right?

Orlando Cabrales

No. We have not changed the CapEx guidance for Q3. This is still the same. So the original made, we updated our guidance related to Guyana, I think it was in May, June because of the additional costs that we discussed in the prior call. But we have not updated guidance. And what I alluded in my notes was that we expect to be in the lower range of the updated guidance for Guyana of between $180 million to $185 million. What was the balance of question?

Roman Rossi

Regarding the technical information.

Orlando Cabrales

Yes, thanks for the question. Basically, as we indicated before in the previous press release that we made on the web results, we are going to take two to three months to finalize all the integration. Basically, we still are going to be within that time frame. We are making progress on preparing the data by a third party. But then as we alluded also before, we have a lot of data, not just for the Campanian but also mainly for the Santonian. There’s a lot of information that we have to analyze and integrate. So we are on track, and we are making good progress. We have a lot of data. And we are with the same time frame that we had indicated before on the two to three months after the release of the information.

Roman Rossi

Okay. Thank you very much.

Operator

Thank you. Your next question comes from Jacob Steinfeld from Ashmore. Please go ahead.

Jacob Steinfeld

Hi, good morning. Congrats on the results. I had two questions. The first one was on the NCIB. I think it expired in March. Can you talk about whether you’re planning on renewing it or whether you’re able to repurchase stock? That’s my first question. And the second one is just on — you could just go over your sort of capital allocation plans for the second half of the year in terms of how much CapEx you have remaining and any other plans in terms of capital use and whether this agreement with on Reficar and the port changes your CapEx guidance for the rest of the year.

Orlando Cabrales

Those are really good questions and thank you, Jacob. Your first question about the NCIB. I think that we have said before that we are extremely focused on unlocking value to our stakeholders, and that, for us, has taken multiple different avenues. This year, the focus is still at on key investments into our platform, including the significant investment in CPE-6, the investment related to the — to our potential transformational on Guyana exploration program. To the extent that we have any update on additional NCIB activity that remains at the Board discretion, and we’ll keep the market apprised and update as it actually comes through. But again, the focus is on value creation for our stakeholders and clearly NCIB in the past has been a significant use of that.

On the guidance, we — our guidance remains the same. I think year-to-date, we allocated roughly $286 million. So you should expect to see the remainder of that being consumed. As it relates to the Reficar connection, I would say two things. The timing of the cash flow doesn’t necessarily kind of tie together the — with the current guidance that we have today, there will be some additional expenditures that we will need to do. But if you may recall, we did have funding allocated as part of our original — our refinancing initiative with Reficar — not Reficar, sorry, with Puerto Bahia that would allow us to fund that investment directly from those sources. So that will be the update that I will share with you, Jacob. I can clean up my answer, if you want to clarify any other questions that I could address for you.

Jacob Steinfeld

Just two quick clarifications. So you didn’t purchase any stock in the second quarter.

Orlando Cabrales

No. We have not.

Jacob Steinfeld

Okay. And then on this take-or-pay that you mentioned, maybe it’s too early to say, but do you know what the financial impact would be for the midstream business once it’s up and running?

Rene Burgos

It’s not take-or-pay, it’s a take and pay. We believe that — I can think what Orlando alluded to is this connection should provide additional economic activity of all sorts into the bay and particularly into our port. So we would expect that this would certainly have a very important impact. And as we started refunding numbers, we will give the market a quick update of this matters, and we expect to do that shortly.

Jacob Steinfeld

Great. Thanks.

Operator

Thank you. Your next question comes from Oriana Covault from Balanz. Please go ahead.

Oriana Covault

Hi, thanks for taking the question. This is Oriana Covault with Balanz. I had a follow-up with regards to production and perhaps key drivers for the second half of the year. Just looking at your light and medium crude production and as well as your Ecuador crude production dropped during the quarter in natural gas. So just to understand of the moving parts and how should we expect for light and medium crude to recover perhaps to average levels seen in 2022? And if this natural gas volumes should be like the new normal going on or what should we expect from that end? Thanks.

Orlando Cabrales

No, I think that the expectation — thank you for the question. The expectation is that certainly, we are very comfortable that we will be within the guidance that we provide to the market. As we have indicated, we are having positive results during the second quarter in terms of our capacity to increase water handling in the heavy oil field with SAARA and doubling the capacity in the CPE-6. We have achieved record production at CPE-6. So very positive result there. There is a good indication that we’ll also provide you in our press release about the operation well that we finished [indiscernible] well in the Perico block that Frontera operates. So no more to say on that at this point in time, given that this is coming from production since yesterday. And we continue to manage declining our light medium oil assets. So again, there is no change in the guidance, and we feel very comfortable about that.

Oriana Covault

Great. Thank you. And maybe just one clarification. Going back to the CapEx needs. And I’m understanding that due to some timing of cash flows that wouldn’t necessarily match your CapEx, you might see some additional cash outlay. So if you could perhaps clarify in which order should we see it? And this is only due because of the increased participation in current time and/or also because of some initial payments associated with the Reficar connection? Thank you.

Orlando Cabrales

[indiscernible]

Oriana Covault

No. I’m just thinking of the timing of cash flow because you haven’t made any changes or updates to your full year CapEx after June that was completely clear, but you have this Reficar announcement, and you mentioned some additional cash outlays through the year. So should we expect any changes in forward? And what could explain this is because of the increased participation in Corentyne, like a marginal increase there over this transfer of 7% participation. Just to understand if this CapEx figure that we’re seeing through the remainder of the year should stick?

Orlando Cabrales

So let me just provide this clarity. So if you go to our MD&A, and look our guidance — we have not updated our Colombia and Ecuador guidance expenditures. There’s been no change there. Also, there has been no change in the Guyana exploration because that guidance already reflects the — our expected total investment of around $190 million to $195 million. [indiscernible] As it relates to my comment on the cash outlays, what I wanted to provide clarity was what is the remaining amount of cash that we need to disburse from the second quarter onwards to finish the investment in Guyana according to our guidance, Oriana. A question on the forward there could be some amount of CapEx this year, but that amount of CapEx will be relatively small and it wouldn’t impact our guidance because the construction period now begins. So we would expect to provide you guys with better clarity on that broadly during the next call. But as of right now, it does not change our guidance with respect to the CapEx.

Oriana Covault

Perfect. That’s very clear. Thank you very much, guys.

Orlando Cabrales

Thank you.

Operator

[Operator Instructions] Your next question comes from Sara Constantin from [indiscernible]. Please go ahead.

Unidentified Analyst

Hi, good morning. Congratulations on a great quarter. I had basically two questions since some of my having previously answered. So my first one is, clearly, the market is kind of undervaluing your company on some of all parts. You have three main businesses, and it seems like they’re fairly heavily discounted when you look at your market cap. Has there been any consideration of taking your midstream business and spinning it off as a separate entity and having its own, I guess, ticker symbol. And I guess my second question is, given elevated rent pricing, I know previously, you all had had more significant puts in place to protect your cash flow? Have you considered potentially putting in a more year-long schedule for puts to maintain the $80-plus Brent pricing? Thank you.

Orlando Cabrales

Let me take the first one, and you can take the second one. On your first one, it’s a good question. And the way I would answer that is that we are permanently looking at opportunities and strategic options to maximize value for our shareholders. And definitely, as you said, I mean, the some of the parts of our three core businesses are not reflected in the market of the company. So — and as you could see, I mean, we are delivering on the three core businesses. So the Upstream Colombia, Ecuador, we are within our guidance, in terms of cost, production and EBITDA at $80 of Bent. We have positive developments in the midstream segment. We also have significant progress on the Guyana side. So we are delivering on the three core business of the company. And certainly, the sale product doesn’t reflect the core value of the market recognized. So we are, I mean, permanently as management and our Board looking to those opportunities to fully maximize the value for our shareholders.

Rene Burgos

And on your hedging question is a great point, I would add that we are very pragmatic with our hedges. So that is to strike a balance between the cost of the hedge and the effectiveness of the hedge. So what we try to do and I think what we’ve done through this year is provide certainty into our cash flow, particularly in a year that included a significant amount of investment program. We will continue to exploit that because I do believe that it helps providing visibility to our sales and manager, but also you guys, our investors. And if the timing is correct and things work, we would love to enter into longer dated hedges. But right now, we’re kind of striking the proper balance between right price, budget and kind of value.

Unidentified Analyst

All right. Well, thank you very much.

Operator

Thank you. Your next question comes from Christine Guerrero from Brickhouse Ventures. Please go ahead.

Christine Guerrero

Hello. Yeah. My questions were regarding the quarantine license itself in Guyana. So the first question is what is the total accumulated [sub-cost] (ph) in the license to date that would be recoverable if this license rolls into a production license. And also, you currently fulfilled all your commitment on the exploration stage of the license. How much time do you have before the license converts over to a production license? And I’m assuming that there would have to be a commitment then to bring a development on. And again, that’s an assumption. So I’m looking for clarity from you on what the process is going forward for this license if you continue to hold it?

Orlando Cabrales

I would — let me start, Christine, thank you for your questions. I think, I mean my first my first reaction would be — as we said, we are, I mean, analyzing the significant amount of data that we got on the well. So that will take, as was indicated before, like a couple of months. So that will create us a better perspective on the block, on the potential of the block and how to move into the forward basis to say something more, I mean, say something more than that is going to be difficult at this point in time. And as I said, I mean as we have indicated before we normally, permanently looking into strategic options for the current team for the Corentyne result. But that is where we are concentrated right now. And any potential move after this space will be subject to the analysis that we are conducting to the results of the analysis that we are conducting today.

Christine Guerrero

Yes. But again, like I’m just wondering what the [sub-cost] (ph) is today because if this does roll forward, that is going to be recoverable. So I know you can’t give me a resource potential right now, but I’m — but you should be able to give me what the [sub-cost] (ph) is.

Rene Burgos

Look, I say that and it’s in our financial statements, the JV and we consolidated JV as of 2019, we’ve invested roughly $440 million in Guyana. That should give you a sense of investment into particularly the Corentyne block, more or less.

Christine Guerrero

So that would include the three wells because I’m looking back to Eagle because I’m assuming Eagle would also the side.

Rene Burgos

This is only — this is only — this is the aggregate number that we have related to the CGX. Remember we consolidated CGX following 2019. Some of the other investments were impaired and no longer are sitting in the balance sheet. So I’m just giving you a balance sheet account today — we include roughly $440 million of equity in Guyana, which includes, I would say, roughly $400 million of investments in our two wells, which is the Wei-1 and the Kawa-1 well, and there will be another external investments related to the port. I’m just giving you a number just to you give you a sense of the capital invested following the JV into the two key exploration program wells that we’ve done in 2019.

Christine Guerrero

Okay. Yes, I just — because at one time, Suresh Narine, the CEO of CGX, had mentioned that $700 million had been spent. And I’m trying to figure out what portion of the $700 million goes to Corentyne.

Rene Burgos

So why don’t we take it back internally and maybe we can follow up with you. It’s a good question, Christine, so we’ll get back to you.

Christine Guerrero

Yeah. Okay, thank you.

Operator

Thank you. There are no further questions at this time. Should you have any further questions, please e-mail [email protected]. This concludes the call. Thank you all for participating.