Parex Resources Enters into a Definitive Agreement to Acquire Frontera Energy's Colombian E&P Assets

Executive Summary

• Parex Resources Inc. entered into a definitive Arrangement Agreement to acquire 100% of Frontera Petroleum International Holdings B.V., the holder of Frontera’s Colombia E&P assets, for US$525 million in cash plus assumption of net debt and a contingent payment.
• The transaction will double Parex’s production on a pro‑forma basis (to ~80–88 k boe/d), add 99 mmboe of proved reserves and is expected to be immediately accretive to funds flow per share (>40%) and free funds flow per share (>25%).
• Pro‑forma leverage will improve to ~0.8× net debt/EBITDA, with anticipated annual cost synergies of US$20–50 million and a strong balance sheet to support continued dividend payments.

Key Details

• Purchase Price: US$500 M cash at closing + US$25 M contingent payment (triggered by extension of the Quifa Association Contract within 12 months).
• Debt Assumption: Net debt of US$225 M plus assumption of Frontera’s US$310 M senior notes (7.875% due 2028), US$80 M pre‑payment facility with Chevron, and cash of ~US$165 M; working capital deficit of US$90 M (subject to adjustments).
• Financing: Cash consideration funded through existing cash, credit facilities, and an underwritten financing commitment from Scotiabank; no equity issuance planned.
• Assets Acquired: 17 blocks covering >1.1 million net acres in Colombia, including the SAARA water‑treatment plant and ProAgrollanos palm‑oil plantation.
• Production Impact: Frontera E&P’s estimated average production ~37,100 boe/d (light & medium crude, heavy crude, gas, NGLs). Pro‑forma 2026E production expected at 80–88 k boe/d.
• Reserve Impact: Adds 99 mmboe of proved reserves (1P) and 147 mmboe of proved‑plus‑probable (2P); EV/1P improves to US$7.31/boe vs. Parex’s prior US$13.77/boe.
• Accretion Metrics: Expected immediate accretion of funds flow per share (>40%) and free funds flow per share (>25%).
• Synergies: Anticipated annual cost synergies of US$20–50 million from administrative efficiencies, marketing, tax, financing and portfolio optimization.
• Leverage & Liquidity: Pro‑forma net debt/EBITDA ~0.8×; ample liquidity under existing credit facility; dividend of C$0.385 per share to be maintained.
• Closing Timeline: Transaction approved by both boards; expected closing in Q2 2026, subject to Frontera shareholder approval (66⅔% vote) and court sanction under BC Business Corporations Act. Effective date set as Jan 1 2026.
• Advisors & Counsel: Scotiabank (financial advisor); Norton Rose Fulbright Canada LLP, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Brigard Urrutia (legal counsel).

Notable Quotes

“The addition of Frontera E&P’s upstream business to our high‑quality portfolio establishes Parex as the largest independent Colombia‑focused upstream company…providing greater scale, enhanced capital efficiency, and a more resilient platform for long‑term growth.” – Imad Mohsen, President & CEO

“The acquisition aligns with our Colombia‑focused strategy, nearly doubling production on a pro forma basis and driving meaningful accretion across all key metrics.” – Imad Mohsen, President & CEO