November 27, 2020

Agreement

TORONTO and BOGOTÁ, Nov. 17, 2020 /CNW/ – Frontera Energy Corporation (TSX: FEC) (“Frontera”), Cenit Transporte y Logística de Hidrocarburos S.A.S. (“CENIT”) and Oleoducto Bicentenario de Colombia S.A.S. (“Bicentenario”) separately announced today that they have reached an agreement for the joint filing of a petition for a binding settlement which, upon completion and approval by the competent Colombian court, will resolve all the disputes pending among them, related to the Bicentenario Pipeline (“BIC Pipeline”) and the Caño Limón – Coveñas Pipeline (“CLC Pipeline”), and will terminate all the pending arbitration proceedings related to such disputes. All the Frontera subsidiaries involved in those proceedings are also parties to the agreement, and references to Frontera include such subsidiaries. All financial amounts in this news release are in United States dollars, unless otherwise stated.

The parties consider that this transaction eliminates any uncertainty related to the potential outcomes of the disputes, thus protecting the interests of all the parties and those of their stakeholders. The settlement will also create new business opportunities for the parties involved.

The settlement arrangement includes a full and final mutual release upon closing of all present and future amounts claimed by all parties in respect of the terminated transportation contracts for both the CLC Pipeline and the BIC Pipeline, and also in respect of certain related contracts involving the liabilities which are recorded by Frontera as Cost Under Terminated Pipeline Contracts. Further information about all those claims is contained in Frontera’s Interim Financial Statements dated November 3, 2020.

The transaction does not include any cash payments between the parties, except for Frontera’s release of its interests in a trust fund (restricted cash) of approximately $28 million created as a collateral for one of the claims. Frontera will transfer to CENIT its 43.03% interest in Bicentenario, any related outstanding Bicentenario dividends, and the BIC Pipeline line fill. The claims released by Frontera include recovery of the letters of credit drawn by Bicentenario in 2018 and all other claims that have been asserted by Frontera against Bicentenario.

Frontera will also enter into new transportation contracts with CENIT and its subsidiaries Bicentenario and Oleoducto de los Llanos Orientales S.A. (“ODL”).

The new ODL transportation contract is expected to commence in the first quarter of 2021. The ODL transportation contract would provide for a ship or pay commitment of 10,000 bbls/day for approximately 3.8 years at a current tariff of $4.0/bbl. The ODL pipeline is regularly used by Frontera to transport crude oil from its heavy oil district which produces sufficient volumes to comply with the new obligations. The new ODL contract is not expected to impact Frontera’s transportation costs.

The new transportation contracts with CENIT and Bicentenario for use of the CLC Pipeline and BIC Pipeline (and certain related facilities) will become effective within a six month period as of the closing of the transaction. The new take or pay commitment is projected to be approximately 3,900 bbls/day, subject to adjustments in changes in the oil price and

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