Frontera Energy Corporation has entered into a $120 million prepayment and commercial agreement with Chevron Products Company through its Colombian subsidiary, replacing an existing deal set to expire in early 2026.
Under the agreement, Frontera will receive an initial $80 million advance and commit a portion of its Colombian crude production to Chevron for a two-year period. The company also retains the option to draw an additional $40 million advance for up to six months on a fully committed basis.
The prepayment carries a financing cost linked to the Secured Overnight Financing Rate (SOFR) plus 4.25% per year, with repayment beginning after a six-month grace period. Frontera said the proceeds will be used to manage working capital flows and strengthen liquidity.
Crude prepayment agreements have become an increasingly important financing tool for mid-sized upstream producers operating in emerging markets, particularly in Latin America, where access to low-cost capital can be constrained by political risk, regulatory uncertainty, and volatile commodity prices.
For Frontera, the deal provides near-term balance sheet flexibility without issuing equity or taking on conventional bank debt, while ensuring a stable offtake outlet for part of its production. Similar structures are widely used by national oil companies and independent producers in Colombia, Brazil, and Ecuador to smooth cash flows and fund ongoing operations.
The replacement of Frontera’s existing prepayment agreement ahead of its January 2026 expiry also signals continued confidence from Chevron in the company’s production profile and operational stability in Colombia, despite ongoing debates over hydrocarbons policy under the country’s left-leaning government.
Chevron, meanwhile, secures a reliable crude supply from a diversified Latin American producer at a time when competition for medium and heavy barrels remains strong, particularly in Atlantic Basin markets.
Frontera operates a diversified portfolio across Colombia and Guyana, with interests in 20 exploration and production blocks as well as pipeline and port infrastructure. While Colombia remains its core producing region, the company has been working to preserve liquidity and operational resilience amid fluctuating oil prices and evolving fiscal and environmental frameworks.
By Charles Kennedy for Oilprice.com
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