Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). Frontera Energy has "Adequate" ESG in our view, in line with its Environmental, Social and Governance scores. Controversies are "Immaterial" and Disclosure is "Strong".

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).  Frontera Energy has "Adequate" ESG in our view, in line with its Environmental, Social and Governance scores. Controversies are "Immaterial" and Disclosure is "Strong". 

Frontera Energy - ESG Report - Lucror Analytics

Global energy equity and oil & gas macro analyst

Anish Kapadia

Akap Energy

Thematic (Sector/Industry)

Now that the U.S. has imposed tougher sanctions on Venezuela, we examine the potential impact on the oil market and the companies that will impacted, some positively and some negatively. The sanctions should have a positive impact on the oil price and in particular producers of heavier crude (e.g. Canadian/Colombian/Mexican producers) but a negative impact on the more complex refiners that use heavy crude on the US Gulf Coast.

Now that the U.S. has imposed tougher sanctions on Venezuela, we examine the potential impact on the oil market and the companies that will impacted, some positively and some negatively. The sanctions should have a positive impact on the oil price and in particular producers of heavier crude (e.g. Canadian/Colombian/Mexican producers) but a negative impact on the more complex refiners that use heavy crude on the US Gulf Coast. 

Venezuelan Sanctions: What Is the Crude Market Impact and Which Stocks Are Affected

Global Cross-Asset Energy Analyst, VAC Investments

Aaditya Chintalapati, CFA

Global Cross-Asset Energy Analyst

VAC Investments

Equity Bottom-Up

Frontera's quarter-to-date share price weakness (-20% QTD abs. return) is largely explained by weak oil prices (WTI -27% QTD abs. return) and are broadly in-line with the rest of the Colombian E&amp;Ps. In addition, recent 3Q18 results were marked by a production miss due to Peru-related pipeline issues, and a consequent 5% lowering of FY18 production and cash flow guidance. However, we remain bullish on the stock, given - (i) a conservative management team focused on maintaining production with a cash-flow neutral capex strategy; (ii) anticipated fleshing-out of 2019 exploration upside with the budget announcement next month; and (iii) shares screening extremely attractively versus regional peers, trading at 2x 2019E EV/EBITDA. We reiterate our BUY rating and see c.70% upside to our Price Target of CAD 25/share.

Frontera's quarter-to-date share price weakness (-20% QTD abs. return) is largely explained by weak oil prices (WTI -27% QTD abs. return) and are broadly in-line with the rest of the Colombian E&amp;Ps. In addition, recent 3Q18 results were marked by a production miss due to Peru-related pipeline issues, and a consequent 5% lowering of FY18 production and cash flow guidance. However, we remain bullish on the stock, given - (i) a conservative management team focused on maintaining production with a cash-flow neutral capex strategy; (ii) anticipated fleshing-out of 2019 exploration upside with the budget announcement next month; and (iii) shares screening extremely attractively versus regional peers, trading at 2x 2019E EV/EBITDA. We reiterate our BUY rating and see c.70% upside to our Price Target of CAD 25/share. 

Frontera Energy (FEC CN): FY18 Guidance Lowered, But Shareprice Catalysts Unchanged; BUY

<h2><a href="https://www.smartkarma.com/entities/22869" target="_blank" data-smartkarma-citation="entities:22869:1">Crude Oil (CRUDE OIL COMDTY)</a></h2>WTI ended the week at US$ 71.49/bbl while Brent ended at US$ 80.5/bbl, both c.4% lower for the week. This was driven by a surprisingly large build in US inventories for the week and limited disruption to GoM production infrastructure from Hurricane Michael. However, a fresh diplomatic crisis over the weekend threatens to boost crude oil risk premia this week, with the US calling for an investigation over the disappearance of the journalist Jamal Khashoggi from the Saudi consulate in Istanbul, and Saudi Arabia in turn vowing to respond strongly in the event of US sanctions. Curiously, this crisis provides an opportunity for a detante between the US and Turkey, even as President Trump finds himself in the unenviable position of having to choose between lower oil prices and sending a strong message to Saudi Arabia.

Crude Oil (CRUDE OIL COMDTY)WTI ended the week at US$ 71.49/bbl while Brent ended at US$ 80.5/bbl, both c.4% lower for the week. This was driven by a surprisingly large build in US inventories for the week and limited disruption to GoM production infrastructure from Hurricane Michael. However, a fresh diplomatic crisis over the weekend threatens to boost crude oil risk premia this week, with the US calling for an investigation over the disappearance of the journalist Jamal Khashoggi from the Saudi consulate in Istanbul, and Saudi Arabia in turn vowing to respond strongly in the event of US sanctions. Curiously, this crisis provides an opportunity for a detante between the US and Turkey, even as President Trump finds himself in the unenviable position of having to choose between lower oil prices and sending a strong message to Saudi Arabia.

<a href="https://www.smartkarma.com/entities/25655" target="_blank" data-smartkarma-citation="entities:25655:1">Frontera Energy (FEC CN)</a>'s Acorazado exploration well (Llanos 25, Colombia) discovered significant oil &amp; gas pay, albeit achieving lower than expected flow rates and uncertain commerciality. A successful well was expected to help address investor concern around Frontera's resource upside and production growth potential. However, given the mixed results at the well, we believe management will now need to focus on building a robust hopper of exploration prospects for 2019, via licensing rounds and acquisitions. Crucially, with the company generating c.US$300m of FCF per year, we believe Frontera is well placed for accretive resource acquisitions in the region. We see c.50% upside to our C$27/share price target, which is based on our Base Case NAV.

Frontera Energy (FEC CN)'s Acorazado exploration well (Llanos 25, Colombia) discovered significant oil &amp; gas pay, albeit achieving lower than expected flow rates and uncertain commerciality. A successful well was expected to help address investor concern around Frontera's resource upside and production growth potential. However, given the mixed results at the well, we believe management will now need to focus on building a robust hopper of exploration prospects for 2019, via licensing rounds and acquisitions. Crucially, with the company generating c.US$300m of FCF per year, we believe Frontera is well placed for accretive resource acquisitions in the region. We see c.50% upside to our C$27/share price target, which is based on our Base Case NAV.

Frontera Energy (FEC CN): Mixed Results at Acorazado Reiterate Investor Concerns

Canada

Frontera Energy Corporation provides oilfield services. The Company explores, develops, and produces crude oil and natural gas. Frontera Energy serves customers worldwide.

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Frontera Energy (FEC CN)

Frontera Energy - ESG Report - Lucror Analytics

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). Frontera Energy has "Adequate" ESG...

Lucror Analytics

Venezuelan Sanctions: What Is the Crude Market Impact and Which Stocks Are Affected

Now that the U.S. has imposed tougher sanctions on Venezuela, we examine the potential impact on the oil market and the companies that will...

Anish Kapadia