Professional Special Situation Investor, TripleS Special Situation Investing

Triple S Special Situations Investing

Professional Special Situation Investor

TripleS Special Situation Investing

Professional Special Situation Investor with over 20 years of experience.

Equity Bottom-Up

<ul><li>Despite a checkered past and recent setbacks, Frontera Energy Corporation (TSX: FEC, OTC: FECCF) presents a compelling investment opportunity for value investors with a high risk tolerance.</li><li>The combination of substantial reserves, undervalued infrastructure assets, and an eye-popping recent yield creates a potential value proposition that shouldn't be overlooked, even considering the company's baggage.</li><li>Before diving into the investment thesis, we must acknowledge the elephant in the room: Frontera's controlling shareholder.</li></ul>

Despite a checkered past and recent setbacks, Frontera Energy Corporation (TSX: FEC, OTC: FECCF) presents a compelling investment opportunity for value investors with a high risk tolerance.The combination of substantial reserves, undervalued infrastructure assets, and an eye-popping recent yield creates a potential value proposition that shouldn't be overlooked, even considering the company's baggage.Before diving into the investment thesis, we must acknowledge the elephant in the room: Frontera's controlling shareholder.

Frontera Energy: High-Yield Value Play Despite South American Shenanigans

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). We assess Frontera Energy's ESG as "Adequate", 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).  We assess Frontera Energy's ESG as "Adequate", in line with its Environmental, Social and Governance scores. Controversies are "Immaterial" and Disclosure is "Strong". 

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 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". 

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

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

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: High-Yield Value Play Despite South American Shenanigans

Despite a checkered past and recent setbacks, Frontera Energy Corporation (TSX: FEC, OTC: FECCF) presents a compelling investment opportunity for...

Triple S Special Situations Investing

Frontera Energy - ESG Report - Lucror Analytics

Lucror Analytics' ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable). We assess Frontera Energy's ESG as...

Lucror Analytics

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

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

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...

Aaditya Chintalapati, CFA

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