itstargetnews
Frontera Energy Corporation has signed a $120 million commercial and prepayment agreement with Chevron Products Company through its Colombian subsidiary, replacing an existing agreement that will expire in early 2026.
Under the agreement, Frontera will receive an initial advance of $80 million and commit a portion of its Colombian crude production to Chevron for a period of two years. The company also retains an option to draw an additional $40 million advance for up to six months on a fully committed basis.
Prepayment carries a funding cost linked to the Assured Overnight Funding Rate (SOFR) plus 4.25% per annum, and repayment begins after a six-month grace period. Frontera said the proceeds will be used to manage working capital flows and strengthen liquidity.
Crude forward payment agreements have become an increasingly important financing tool for mid-sized producers operating in emerging markets, particularly in Latin America, where access to low-cost capital can be constrained by political risk, regulatory uncertainty and commodity price volatility.
For Frontera, the deal provides short-term balance sheet flexibility without issuing capital or taking on conventional bank debt, while guaranteeing a stable outlet for part of its production. Similar structures are widely used by domestic oil companies and independent producers in Colombia, Brazil and Ecuador to smooth cash flows and finance ongoing operations.
The replacement of Frontera’s existing prepayment agreement before its January 2026 expiration also indicates Chevron’s continued confidence in the company’s production profile and operational stability in Colombia, despite ongoing debates over hydrocarbon policy under the country’s leftist government.
Chevron, meanwhile, ensures a reliable supply of crude oil from a diversified Latin American producer at a time when competition for medium and heavy barrels remains strong, particularly in the Atlantic basin markets.
Frontera operates a diversified portfolio in Colombia and Guyana, with interests in 20 exploration and production blocks, as well as pipeline and port infrastructure. While Colombia remains its primary 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
More top reads from Oilprice.com
