Frontera Announces Three Percent Production Growth and 100% Exploration Success in the First Quarter of 2018

Frontera Announces Three Percent Production Growth and 100% Exploration Success in the First Quarter of 2018

High Impact Acorazado-1 Exploration Well Drilling

TORONTO, May 10, 2018 /PRNewswire/ - Frontera Energy Corporation (TSX: FEC) ("Frontera" or the "Company") announced today the release of its consolidated financial statements for the first quarter of 2018, together with its management, discussion and analysis ("MD&A"). These documents will be posted on the Company's website at www.fronteraenergy.ca and SEDAR at www.sedar.com. All values in this news release and the Company's financial disclosures are in United States dollars unless otherwise stated.

FIRST QUARTER 2018 AND OPERATIONAL HIGHLIGHTS

Production Growth Driven by Peru Reactivation

    --  Net Production increased 3% quarter-over-quarter to 66,227 boe/d in Q1
        2018.
    --  The Company completed the drilling of 33 development wells and three
        exploration wells during Q1 2018.
    --  Total capital expenditures were $78.8 million during Q1 2018, 29% lower
        than Q4 2017.

Cost Control Improves Profitability

    --  Production costs of $12.47/boe were 5% lower in Q1 2018 than Q4 2017.
    --  General and administrative costs ("G&A") of $22.1 million were 10% lower
        than the previous quarter.
    --  Frontera's Q1 2018 Operating Netback of $24.42/boe was 3% higher in Q1
        2018 than Q4 2017.

Strong Balance Sheet

    --  The Company's total cash position, including restricted cash, increased
        8% quarter-over-quarter to $695.9 million at the end of Q1 2018.
    --  Working capital increased 11% to $343.1 million during the first
        quarter, compared to $310.0 million at the end of Q4 2017.

Exploration Success and Exciting Exploration Opportunity Pipeline

    --  Coralillo-1 exploration well in the Guatiquia block completed and is
        currently testing at an average rate of 1,000 bbl/d.
    --  Alligator-2 exploration well in the Guatiquia block completed and tested
        at an average rate of 1,000 bbl/d.
    --  Jaspe-6D exploration well in the Quifa area completed and tested at an
        average rate of 187 bbl/d.
    --  Acorazado-1 exploration well in the Llanos 25 block started drilling on
        April 22, 2018.
    --  Frontera plans to drill the Delfin Sur-1 exploration well offshore Peru
        during Q3 2018.

Richard Herbert, Chief Executive Officer of Frontera, commented:

"It has been an exciting start to my tenure as Chief Executive Officer at Frontera, as we pursue our 2018 theme, "Positioning for Growth." After spending time with our operations and planning teams, I am encouraged that the Company can generate both significant cash flow, from stable production of our existing assets, and growth, from exploration and high impact strategic initiatives. We continue to enjoy exposure to strong international Brent oil prices, the positive impact of which is expected to be magnified when our current hedges roll off in November of this year. In April, we started drilling at our Acorazado-1 location in the Llanos foothills of Colombia, targeting a large structure on trend with the giant Cusiana and Cupiagua fields."

Quarterly Production Growth Driven by Peru Reactivation:



    Net Production Summary
    ======================

    Net Production:(1)                  2018       2017
    -----------------                   ----       ----

                                  Q1         Q4         Q1
                                  ---        ---        ---

    Oil and Liquids (bbl/d)
    -----------------------

    Colombia                          52,195     56,593     62,180
    --------                          ------     ------     ------

    Peru                               9,157      2,538      3,855
    ----                               -----      -----      -----

    Total Oil and Liquids (bbl/d)     61,352     59,131     66,035
    -----------------------------     ------     ------     ------


    Natural Gas (boe/d)(2)
    ----------------------

    Colombia                           4,875      5,314      6,489
    --------                           -----      -----      -----

    Total Natural Gas (boe/d)          4,875      5,314      6,489
    -------------------------          -----      -----      -----

    Total Equivalent Production
     (boe/d)                          66,227     64,445     72,524
    ===========================       ======     ======     ======

    (1)Additional production
     details are available in the
     MD&A.

    (2)Colombian standard natural
     gas conversion ratio of 5.7
     Mcf per bbl as required by
     the Colombian  Ministry of
     Mines and Energy.

Net Production in the first quarter of 2018 totalled 66,227 boe/d representing an increase of 3% compared with the fourth quarter of 2017. The increase was driven by significant oil production growth in Peru that was partially offset by declines in Colombia as a result of social unrest at the Cubiro block that has now been resolved, increased volumes of 1,257 boe/d paid-in kind to Ecopetrol S.A. from production at the Quifa block pursuant to the high price participation clause in the governing exploration and exploitation contract and natural production declines on the Company's natural gas assets at La Creciente. First quarter Net Production decreased 9% from the Net Production of 72,524 boe/d reported in the same period of 2017, due to lower activity levels throughout 2017 and natural production declines of the Company's light and medium oil blocks in Colombia.

A total of 33 development wells and three exploration wells were completed in the first quarter of 2018, compared to 36 development wells and three exploration wells in the previous quarter. The Company currently has six drilling rigs operating in Colombia, with three in each of our core light/medium and heavy oil areas. During the second quarter of 2018 the Company plans to drill 25 development wells and has started drilling one exploration well.

Exploration and Development Successes in Light/Medium and Heavy Oil Businesses:

Light and Medium Oil Business:

    --  In January 2018, the Company began drilling the Alligator-2 exploratory
        well on the Guatiquia block. On February 16, 2018, the well reached a
        true vertical depth ("TVD") of 12,280 feet, encountering 24 feet of net
        pay in the Lower Sand-1A formation. The well was completed in the upper
        10 feet of the Lower Sand-1A formation with an electrical submersible
        pump. The well flow tested for 26 days in March 2018 at an average rate
        of 1,000 bbl/d of 22.5 degree API oil with an average water cut of 40%
        at a stabilized bottomhole pressure with an 6% drawdown. The production
        test was concluded due to a pump failure and the well is awaiting a pump
        change to resume production. Since discovery, the well has produced a
        total of 24,000 bbls.
    --  In March 2018, the Company began drilling the Alligator-3 development
        well on the Guatiquia block. On April 27, 2018, the well reached a total
        depth of 12,416 feet (12,189 feet TVD), encountering 31.5 feet of net
        pay in the Lower Sand-1A formation. The well is currently being
        completed as a new production well.
    --  In February 2018, the Company began drilling the Coralillo-1 exploratory
        well on the Guatiquia block, which reached total depth of 13,240 feet
        (11,573 feet TVD) on March 27, 2018. The well encountered 13 feet of net
        pay in the Guadalupe formation, and 15 feet of net pay in the Lower
        Sand-1A formation. The well was completed in the Guadalupe and Lower
        Sand-1A formations with a selective completion and electrical
        submersible pump. The Lower Sand-1A formation has been flow tested for
        approximately 10 days at an average rate of 1,050 bbl/d of 15.3 degree
        API oil with an average water cut of 1% at stabilized bottomhole flowing
        pressure with a 60% drawdown. The well is currently shut-in for a
        pressure buildup test on the Lower Sand-1A formation. During the testing
        period, the well produced a total of 9,200 bbls of oil.
    --  On April 22, 2018, the Company began drilling the Acorazado-1
        exploration well on the Llanos 25 block. The well is targeting to drill
        to a total depth of approximately 16,000 feet and will take between 90
        to 120 days to complete and cost between $35 and $50 million.The well is
        currently drilling at nearly 7,000 feet TVD.

Heavy Oil Business:

    --  In January 2018, the Company drilled four vertical wells in the Quifa SW
        field which were outside the previously mapped field boundaries and
        successfully identified new areas of oil saturated reservoir sands. This
        finding has opened up new development well locations for drilling in
        2018 and beyond.
    --  In March 2018, the Company received approval from its partner, Ecopetrol
        S.A., to begin implementing projects that will increase the water
        handling capacity in the Quifa area. The successful expansion of the
        Company's water handling capacity in the Quifa area will enable the
        Company to increase overall production from the block by allowing
        currently shut-in wells to be placed back on production. The
        implementation of this project will be undertaken during the second and
        third quarter of 2018 with the increased capacity coming on-stream
        during the fourth quarter of 2018.
    --  In January 2018, the Company began drilling the Jaspe-6D exploratory
        well in the Quifa area (partner Ecopetrol S.A., WI 40%). The well was
        drilled to a total depth of 4,900 feet measure depth (3,491 feet TVD)
        encountering 33 feet of net pay in the Basal Sand formation. The well
        was completed on February 5, 2018, with an electrical submersible pump
        and with 10 feet of perforations at the top of the Basal sand formation.
        The well was flow tested for 11 days at an average rate of 187 bbl/d of
        a 13 degree API oil with an average water cut of 10% at stabilized
        bottomhole flowing pressure with a 14% drawdown. During the last 24
        hours of testing, the well averaged 174 bbl/d and with a 30% water cut.
        The well was then shut-in for a 14-day buildup. Since discovery, the
        well has produced a total of 2,100 bbls of oil. The well is currently
        shut-in and the Company is awaiting approvals for extended testing.

Financial Results:



    Financial Summary
    =================

                                           2018        2017
                                           ----        ----

                                      Q1         Q4          Q1
                                     ---        ---         ---

    Total sales after realized loss
     on risk management contracts ($
     millions)                            249.5       335.3      316.6
    --------------------------------      -----       -----      -----

    Net (loss) income ($
     millions)(3)                         (3.1)     (32.5)       8.5
    --------------------                   ----       -----        ---

    Per share - basic and diluted(2)     (0.06)     (0.65)      0.17
    --------------------------------      -----       -----       ----

    Net cash provided by operating
     activities ($ millions)               30.3       166.8       66.9
    ------------------------------         ----       -----       ----

    Operating EBITDA ($ millions)(1)       86.0       105.0       92.4
    --------------------------------       ----       -----       ----

    Operating EBITDA margin
     (Operating EBITDA/total
     sales)4                                34%        31%       29%
    ------------------------                ---         ---        ---

    Adjusted EBITDA ($ millions)(1)        86.7         2.0      115.1
    ------------------------------         ----         ---      -----

    Adjusted EBITDA margin (Adjusted
     EBITDA/total sales)4                   35%         1%       36%
    --------------------------------        ---         ---        ---

    Adjusted FFO ($ millions)(1)           34.3        94.7       78.8
    ---------------------------            ----        ----       ----

    Per share - basic(2)                   0.69        1.89       1.58
    -------------------                    ----        ----       ----

    Net Production (boe/d)               66,227      64,445     72,524
    ----------------------               ------      ------     ------

    Sales volumes (boe/d)                52,440      65,481     70,452
    ---------------------                ------      ------     ------

    Average shares outstanding -
     basic (millions)                      50.0        50.0       50.0
    ----------------------------           ----        ----       ----

    (1)These metrics are Non-IFRS
     financial measures. See
     advisories - "Non-IFRS
     Financial Measures" - below and
     "Non-IFRS Measures " on page 13
     of the MD&A.

    (2)The basic weighted average
     numbers of common shares for the
     years ended March 31, 2018 and
     2017 were 50,005,832 and
     50,002,363, respectively.

    (3)Net (loss) income attributable
     to equity holders of the parent.

    4Total sales represents total
     sales after realized loss on
     risk management contracts.

    --  The average Brent oil benchmark price increased by $5.77/bbl, or 9% in
        the first quarter of 2018 to average $67.23/bbl, compared to $61.46/bbl
        in the fourth quarter of 2017. Brent oil benchmark price averaged
        $54.57/bbl in the first quarter of 2017. The Company's realized oil
        price of $63.43/bbl in the first quarter of 2018 excludes the impact of
        $8.98/bbl of realized losses on risk management contracts. The Company
        remains hedged on approximately 60% of net daily production volumes
        until the end of October 2018, however, the realized price for the
        Company will improve by approximately $4.50 per barrel in the third
        quarter as a result of higher hedged ceiling prices and is currently
        unhedged for November and December 2018.
    --  For the first quarter of 2018, total sales after realized risk
        management contracts, decreased 26% to $249.5 million compared to $335.3
        million in the fourth quarter of 2017 and decreased 21% from $316.6
        million in the first quarter of 2017. Historically, sales volumes trend
        between 3% and 5% below production volumes as a result of internal
        consumption. The 21% decrease in sales volumes as compared to production
        volumes in the first quarter of 2018 was a result of three factors.
        Firstly, oil inventory increased in Colombia by 522,700 bbls as a result
        of an oil cargo which finished loading on April 2, 2018. These volumes
        were not recorded as sales in the first quarter of 2018, but will be
        reflected in sales in the second quarter of 2018 and totalled
        approximately $31.1 million. Secondly, inventory increased in Peru as
        the ramp up in production on block 192 was higher than our sales
        entitlements based on the existing ownership of line fill in the
        pipeline. Inventories in Peru are expected to continue to build until
        the fourth quarter of 2018, at which point the Company's share of line
        fill and sales volumes will more closely match production volumes.
        Lastly, there was a settlement of an overlift of approximately 270,000
        bbls relating to the fourth quarter of 2017.
    --  The increase in inventory during the first quarter and settlement of
        volumes sold during the previous quarter had a follow on impact to other
        key financial metrics including Operating EBITDA and Adjusted Funds Flow
        from Operations ("Adjusted FFO"). A reconciliation between production
        volumes and sales volumes can be found on page 6 of the MD&A while a
        reconciliation of the impact of certain factors on the dollar value of
        sales can be found on page 8 of the MD&A. Despite the impact of reduced
        sales volumes, primarily related to the timing of events as between
        quarters, the Company continues to expect to deliver operational and
        financial results that meet annual guidance expectations.
    --  During the first quarter of 2018, net loss attributable to equity
        holders of the Company was $3.1 million or $0.06/share, compared with a
        net loss of $32.5 million or $0.65/share, in the fourth quarter of 2017.
        This was due to gains on unrealized risk management contracts and
        foreign exchange, lower depletion, depreciation, and amortization,
        higher share of income from associates and lower impairments offset by
        the reversal of the provision related to high price clause of Corcel
        recognized in the fourth quarter of 2017 and higher income tax expense.
        The Company generated net income of $8.5 million or $0.17/share in the
        first quarter of 2017.
    --  Operating EBITDA of $86.0 million or $1.72/share for the first quarter
        of 2018, was lower in comparison with $105.0 million or $2.10/share
        achieved in the fourth quarter of 2017, and $6.5 million lower than the
        first quarter of 2017, mainly due to lower volume sold during the
        quarter as discussed above.
    --  Adjusted FFO totalled $34.3 million or $0.69/share for the first quarter
        of 2018, a decrease of 64% compared to $94.7 million or $1.89/share
        achieved in the fourth quarter of 2017, and $44.5 million lower than the
        first quarter of 2017. Lower Adjusted FFO was primarily due to lower
        Operating EBITDA of $19.0 million, no dividends received from
        investments in associates during the first quarter of 2018 ($35.5
        million in the fourth quarter of 2017), and higher downtime on the
        Bicentenario pipeline of $11.2 million.

-- The Company continued to build cash during the quarter, with a total cash position of $695.9 million, as at March 31, 2018, an increase of 8% and 24% from the previous quarter and the first quarter of 2017, respectively. Unrestricted cash increased to $515.8 million as at March 31, 2018, from $511.7 million at year end 2017. The increase in cash during the first quarter of 2018 was due to cash generated from operating activities of $30.3 million and the receipt of gross cash proceeds of $20.0 million from the sale of Petroelectrica de los Llanos Ltd. to an affiliate of Electricas de Medellin-Ingeniería y Servicios S.A.S. and gross cash proceeds of $57 million received from InterOil Corporation (now ExxonMobil Canada Holdings ULC) in full satisfaction of the purchase price of the sale of its interests in the petroleum prospect license PPL 475 and petroleum retention license PRL 39 in Papua New Guinea. -- Working capital increased 11% to $343.2 million during the first quarter of 2018, compared to $310.0 million at year end 2017. -- During the first quarter of 2018, total capital expenditures were $78.8 million, lower than $111.2 million in the previous quarter and higher in comparison with $38.8 million in the first quarter of 2017. -- The Company is currently analyzing alternatives for reducing its current financing costs, increasing operating and financial flexibility and raising capital to address future operational commitments. -- In April 2018, Fitch Ratings Inc. ("Fitch") made changes to its rating methodology in respect of its treatment of country-specific recovery ratings. In its revised methodology, Fitch had capped the recovery rating of Colombian corporate issuers at "RR4". As a result, on May 9, 2018, Fitch had changed the credit rating on the Company's $250 million senior secured notes due in 2021 ("Senior Secured Notes") to "B+/RR4" from "BB-/RR3" to bring the Senior Secured Notes in line with their new methodology. Although Fitch has changed the rating of the Company's Senior Secured Notes, Fitch has also reaffirmed the Company's long term Foreign and Local Currency Issuer Default Rating at "B+" ("IDR Rating"). Fitch had based its reaffirmation of the Company's IDR Rating on the Company's continued operational and financial stability. In addition, Fitch removed the Negative Ratings Watch on the Senior Secured Notes. The rating outlook continues to remain stable.

Continued Focus on Cost Reductions and Cost Control:

    --  Operating cost per barrel decreased 6% to $27.94/boe compared to
        $29.65/boe in the fourth quarter of 2017 due to lower production and
        transportation costs (excluding fees paid on suspended capacity).
        Specifically, during the quarter, transportation costs were 11% lower
        quarter-over-quarter, as a result of a reduction in the average pipeline
        tariff rates due to using lower tariff alternative pipeline systems when
        the Bicentenario pipeline system was offline (81 days during the first
        quarter of 2018, compared to 56 days during the fourth quarter of 2017).
        This reduction was partially offset by an increase of $1.86/boe in fees
        paid on suspended pipeline capacity during the quarter. Operating costs
        in the first quarter of 2017 were $25.36/boe, primarily as a result of
        lower production costs and higher production and sales volumes.
    --  General and administrative costs were lower in the first quarter of 2018
        at $22.1 million versus $24.5 million in the fourth quarter of 2017 and
        $27.7 million in the first quarter of 2017. The decrease was mainly a
        result of the Company's continued efforts to reduce overhead costs.
    --  Operating Netback in the first quarter of 2018 was 3% higher to
        $24.42/boe, compared to the fourth quarter of 2017, as a result of lower
        operating costs. Operating Netback in the first quarter of 2017 was
        $20.59/boe.

Annual Guidance Update:

    --  The Company reiterates annual guidance metrics for net production of
        between 65,000 and 70,000 boe/d, Operating EBITDA of between $375 and
        $425 million, and capital expenditures of between $450 and $500 million.
        The unchanged annual guidance metrics reflects an average 2018 Brent oil
        price assumption of $63/bbl. If current Brent oil price trends continue
        for the remainder of 2018 the Company anticipates delivering financial
        results that will exceed current expectations, despite having 60% of
        production hedged until the end of October 2018.

First Quarter 2018 Conference Call Details:

As previously disclosed, a conference call for investors and analysts is scheduled for Friday, May 11, 2018 at 8:30 a.m. (Calgary time), 9:30 a.m. (Bogotá time) and 10:30 a.m. (Toronto time). Participants will include Gabriel de Alba, Chairman of the Board of Directors, Richard Herbert, Chief Executive Officer, David Dyck, Chief Financial Officer and select members of the senior management team.

A presentation and webcast link will be available on the Company's website prior to the call, which can be accessed at www.fronteraenergy.ca

Analysts and interested investors are invited to participate using the following dial-in numbers:


    Participant Number (International/Local):     (647) 427-7450

    Participant Number (Toll free Colombia):      01-800-518-0661

    Participant Number (Toll free North America): (888) 231-8191

    Conference ID:                                                6698788

A replay of the conference call will be available until 11:59 p.m. (Toronto time) and 10:59 p.m. (Bogotá time), Friday, May 25, 2018 and can be accessed using the following dial-in numbers:


    Encore Toll Free Dial-
     in Number:                 1-855-859-2056

    Local Dial-in-Number:       (416)-849-0833

    Encore ID:                                   6698788

About Frontera:

Frontera Energy Corporation 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 30 exploration and production blocks in Colombia and Peru. The Company's strategy is focused on sustainable growth in production and reserves. Frontera is committed to conducting business safely, in a socially and environmentally responsible manner. Frontera's common shares trade on the Toronto Stock Exchange under the ticker symbol "FEC".

If you would like to receive News Releases via e-mail as soon as they are published, please subscribe here: http://fronteraenergy.mediaroom.com/subscribe

Advisories:

Cautionary Note Concerning Forward-Looking Statements

This news release contains forward-looking statements. All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future (including, without limitation, statements regarding estimates and/or assumptions in respect of production, revenue, cash flow and costs, reserve and resource estimates, potential resources and reserves and the Company's exploration and development plans and objectives) are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to the Company. Forward-looking statements are 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 statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: uncertainty of estimates of capital and operating costs, production estimates and estimated economic return; uncertainties associated with estimating oil and natural gas reserves; failure to establish estimated resources or reserves; volatility in market prices for oil and natural gas; fluctuation in currency exchange rates; inflation; changes in equity markets; perceptions of the Company's prospects and the prospects of the oil and gas industry in Colombia and the other countries where the Company operates or has investments; uncertainties relating to the availability and costs of financing needed in the future; the uncertainties involved in interpreting drilling results and other geological data; and the other risks disclosed under the heading "Risk Factors" and elsewhere in the Company's annual information form dated March 27, 2018 filed on SEDAR at www.sedar.com. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.

This news release contains future oriented financial information and financial outlook information (collectively, "FOFI") (including, without limitation, statements regarding expected capital expenditures and Operating EBITDA for the Company in 2018), and are subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraph. The FOFI has been prepared by management to provide an outlook of the Company's activities and results, and such information may not be appropriate for other purposes. The Company and management believe that the FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments, however, actual results of operations of the Company and the resulting financial results may vary from the amounts set forth herein. Any FOFI speaks only as of the date on which it is made and, except as may be required by applicable
securities laws, the Company disclaims any intent or obligation to update any FOFI, whether as a result of new information, future events or results or otherwise.

Disclosure of well tests results in this news release should be considered preliminary until detailed pressure transient analysis and interpretations have been completed. Hydrocarbons can be seen during the drilling of a well in numerous circumstances and do not necessarily indicate a commercial discovery or the presence of commercial hydrocarbons in a well. There is no representation by the Company that the disclosed well results included in this news release are necessarily indicative of long-term performance or ultimate recovery. As a result, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company or that such rates are indicative of future performance of the well.

In addition, reported production levels may not be reflective of sustainable production rates and future production rates may differ materially from the production rates reflected in this news release due to, among other factors, difficulties or interruptions encountered during the production of hydrocarbons.

Non-IFRS Financial Measures

This news release contains financial terms that are not considered in the International Financial Reporting Standards ("IFRS"): Operating and Adjusted EBITDA, Operating Netback, and Adjusted FFO. These non-IFRS measures do not have any standardized meaning, and therefore are unlikely to be comparable to similar measures presented by other companies. These non-IFRS measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These financial measures are included because management uses this information to analyze operating performance and liquidity.

Management believes that EBITDA is a common measure used to assess profitability before the impact of different financing methods, income taxes, depreciation and impairment of capital assets and amortization of intangible assets.

    --  Operating EBITDA represents the operating results of the Company's
        primary business, excluding the effects of capital structure, other
        investments (infrastructure assets), non-cash items that depend on
        accounting policy choices, and one-time items that are not expected to
        recur.
    --  Adjusted EBITDA excludes items of a non-recurring nature (one-time
        items), or items that could make the period-over-period comparison of
        results from operations less meaningful, but includes results from the
        Company's other investments (infrastructure assets).

A reconciliation of Operating and Adjusted EBITDA to net (loss) income is as follows:



                    Three Months Ended
                    ------------------

    (in
     thousands
     of US$)            March 31,        December 31,           March 31,
                                    2018                   2017               2017
    ---                             ----                   ----               ----


    Net
     (loss)
     income(1)                   (3,121)              (32,544)             8,498


    Adjustments

    Income
     tax
     expense
     (recovery)                   10,746               (10,438)            10,034

     Depletion,
     depreciation
     and
     amortization                 72,673                 95,062            101,794

     Impairment
     expenses
     (reversal)                   20,341                 36,468           (10,447)

    Finance
     costs,
     net                           4,247                  5,478              4,897

     Restructuring,
     severance
     costs
     and
     others                        2,838                  2,436              5,946

    Reversal
     of
     provision
     related
     to high-
     price
     clause                            -              (99,622)                 -

    Equity
     tax                               -                     -            11,694

    Other
     loss
     (income)                        604                  4,786            (2,498)

    Foreign
     exchange
     unrealized
     (gain)
     loss                       (21,674)                   373           (14,860)
    -----------                  -------                    ---            -------

    Adjusted
     EBITDA                       86,654                  1,999            115,058
    --------                      ------                  -----            -------

     Unrealized
     (gain)
     loss on
     risk
     management
     contracts                  (17,313)                80,774           (40,145)

    Share of
     income
     from
     associates                 (35,759)              (14,809)          (23,988)

    Gain
     attributable
     to non-
     controlling
     interest                     12,779                  7,172             10,783

    Share
     based
     compensation                  1,054                  2,119                 20

    Foreign
     exchange
     realized
     loss                          2,669                  3,099              3,614

    Fees
     paid on
     suspended
     pipeline
     capacity                     35,904                 24,656             27,100
    ----------                    ------                 ------             ------

     Operating
     EBITDA                       85,988                105,010             92,442
     =========                    ======                =======             ======

    1 Net (loss) income
     attributable to equity
     holders of the Company.



                           2018        2017
                           ----        ----

    (in thousands of
     US$ )           Q1         Q4          Q3          Q2         Q1
    ---------------- ---        ---         ---         ---        ---


    Financial and
     Operational
     results:

    Operating EBITDA     85,988     105,010     105,885     86,857      92,442

    Adjusted EBITDA      86,654       1,999      44,203     87,389     115,058
    ===============      ======       =====      ======     ======     =======

Netbacks

Management believes that Netback is a useful measure to assess the net profit after all the costs associated with bringing one barrel of oil to the market. It is also commonly used by the oil and gas industry to analyze financial and operating performance expressed as profit per barrel.

    --  Operating Netback represents realized price per barrel plus realized
        gain or loss on financial derivatives, less production costs, high-price
        participation payments and royalties paid in cash, transportation and
        diluent costs, and shows how efficient the Company is at extracting and
        selling its product.

The third quarter of 2017 marked the first time the Company disclosed Adjusted FFO, providing stakeholders with greater insight given the increasing significance of these metrics to evaluate operational results.

Adjusted Funds Flow from Operations

Adjusted FFO is a non-IFRS financial measure that adjusts an IFRS measure - cash flow provided (used) by operating activities - for changes in non-cash working capital, which management uses to analyze operating performance and liquidity. Changes to non-cash working capital can include differences in timing of cash flows related to accounts receivable and accounts payable, which management believes reduces comparability among periods. The indicator excludes assets retirement obligation settlements, one-time expenses for the Company not related to ongoing operations such as restructuring and severance costs, and loss (gain) from past assets.



                   Three Months Ended
                   ------------------

    (in
     thousands
     of US$)           March 31,       December 31,           March 31,
                                  2018                   2017             2017
    ---                           ----                   ----             ----

    Net cash
     provided
     by
     operating
     activities                 30,265                166,750           66,926


    Changes
     in non-
     cash
     working
     capital                     1,107                 25,458            5,888
    --------                     -----                 ------            -----

    Funds
     flow
     from
     operations                 31,372                192,208           72,814
    ===========                 ======                =======           ======

     Restructuring
     and
     severance
     costs                       2,838                  2,436            5,946

     Settlement
     of asset
     retirement
     obligations                    50                    367                -

    Gain from
     past
     assets                          -             (100,316)               -
    ---------                      ---              --------              ---

    Adjusted
     FFO                        34,260                 94,695           78,760
    ========                    ======                 ======           ======

Please see the MD&A for additional information about these financial measures.

Boe Conversion

The term "boe" is used in this news release. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of cubic feet to barrels is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. In this news release, boe has been expressed using the Colombian conversion standard of 5.7 Mcf: 1 bbl required by the Colombian Ministry of Mines and Energy. For properties in Peru, the Company has expressed boe using the Peruvian conversion standard of 5.626 Mcf: 1 bbl required by Perupetro S.A., Peru's state regulatory agency.

Definitions:


    bbl(s)                          Barrel(s) of oil
    -----                           ----------------

    bbl/d                           Barrel of oil per day
    -----                           ---------------------

    boe                              Refer to "Boe Conversion"
                                     disclosure above
    ---                             --------------------------

    boe/d                           Barrel of oil equivalent per day
    -----                           --------------------------------

    Mboe                             Thousand barrels of oil
                                     equivalent
    ----                            ------------------------

    MMboe                            Million barrels of oil
                                     equivalent
    -----                           -----------------------

    Mcf                             Thousand cubic feet
    ---                             -------------------

    Net Production                   Net production represents the
                                     Company's working interest
                                     volumes, net of royalties and
                                     internal consumption
    --------------                  ------------------------------

Grayson Andersen, Corporate Vice President, Capital Markets, +57-314-250-1467, ir@fronteraenergy.ca, www.fronteraenergy.ca

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SOURCE Frontera Energy Corporation