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Operator
Good morning, my name is Sergio and I'll be your conference operator today. Welcome to Frontera Energy's second quarter 2023 operating and financial results conference call. All lines are currently on a mute to prevent any background noise. I would now like to remind you that this conference call is being recorded today and is also available through audio webcast on the company's website. There will be a time for questions following the speaker's remarks. Analysts and investors are reminded that any additional questions can be directed to the company at ir.fronterraenergy.ca. This call contains forward-looking information within the meaning of applicable Canadian security laws relating to activities, events, or developments the company believes or expects will or may occur in the future. Forward-looking information reflects the current expectations, assumptions, and beliefs of the company based on information currently available to it. Although the company believes the assumptions are reasonable, forward-looking information is not a guarantee of future performance. Forward-looking information is subject to several risks and uncertainties that may cause the actual results of the company to differ materially from those discussed in the forward-looking information. The company's MD&A for the quarter ended June 30, 2023, and the company's annual information form dated March 1, 2023, and other documents it files from time to time, with securities regulatory authorities describe the risk, uncertainties, material assumptions, and other factors that could influence actual results. Any forward-looking information speaks only as of the date on which it is dated and it is made, and the company claims any intent or obligation to update any forward-looking information except as required by law. I will now like to turn the call over to Mr. Gabriel Alba, Chairman of the Board of Frontera Energy. Mr. De Alba, you may begin your conference.
Sergio
Thank you, operator. Good morning, everyone, and welcome to Frontera's second quarter 2023 earnings call. Joining me on today's call are Orlando Cabrales, Frontera's CEO, and Rene Burgos, Frontera's CFO. Also available to answer questions at the end of the call, we have Victor Vega, VP Field Development Reservoir Management and Exploration. Alejandra Bonilla, General Counsel. Ivana Arevalo, BP Operations. And Renata Campanaro, BP Marketing, Logistics, and Business Sustainability. Frontera continued to efficiently execute its financial, operating, and strategic plan in the second quarter for its three core businesses. In the company's Colombia and Ecuador upstream onshore business, production, cost, operating EBITDA and CAPEX are between 2023 guidance at 80 per barrel average brand prices for the year. In its potentially transformational Guyana exploration business, Frontera and joint venture partner CGX Energy safely concluded its planned two-well exploration program for the current time block and announced an old discovery at way one well offshore Guyana. With the conclusion of the drilling campaign for way one, the joint venture has complied with its exploration commitments under the current time petroleum prospecting license. Way one is the second discovery in the current time block following the CAO1 light oil condensated discovery in 2022. In its standalone and growing Colombian midstream business, I'd like to take a moment to discuss an important development in the company's efforts to unlock value of the sum of its parts. As you likely saw in Frontera's earnings release last night, subsequent to the quarter, Puerto Bahia enter into an agreement to connect the Puerto Bahia liquids terminal in Cartagena with Ecopetrol's Cartagena refinery known as Reficar. Puerto Bahia will build, operate, and maintain the 6.8-kilometer 18-inch bidirectional hydrocarbon flow line, which will have a normal capacity of 84,000 barrels per day. The connection will be capable of handling imported and domestically produced crudes and other hydrocarbons. The agreement is the result of many years of effort by the team and marks a significant milestone for the continued development of the Cartagena Bay as a strategic activity hub for Colombia. And Fronter is excited about the strategic project with Reficar and for the future of its growing and standalone midstream business. Frontera remains committed to generating even more value for shareholders by unlocking the sum of its parts. I will now turn the call over to Orlando Cabrales, Frontera's CEO, and our CFO, René Burgos, who will share their views on Frontera's second quarter results and the performance of our three core businesses. Orlando?
Frontera
Gracias, Gabriel. Good morning, everyone. Frontera delivered positive second quarter results. We increased our average daily production by 1% to approximately 42,000 DOE per day for the quarter, as we successfully brought production back online following the resolution of third-party road blockades that occurred during the first quarter. An increase water handling capacity at KIFA and CP6, where production improved 8.4%. We also grew natural gas liquids production by 41% to approximately 1,800 VOE per day through increased gas ring reinjection at B1. At CP6, We recently achieved daily record production of 6,177 barrels per day. We deployed approximately $155 million in capital spending, primarily to drill 19 development wells at Kifa, CP6, and Pueyron, improve flow lines, build a storage tank, and other facilities to double water handling capacity at CP6, drill two exploration wells in Colombia, and complete wave one exploration drilling activities.
Gabriel
Taking a closer look at our three core businesses.
Frontera
In our Colombia and Ecuador upstream business, Frontera produced 41,436 BOE per day from each Colombian operations. We drill 19 development wells in the second quarter at KIPA, CP6, and Cubito blocks, and one injector well at the CP6 block. And we currently have two drilling rigs, and one work-over rig active at our KIPA, CP6, and Corsair Guaipiquea blocks in Colombia. Production from KIPA and Kahua fields average approximately 18,408 barrels per day of heavy crude in the quarter, up 9.4% compared to the first quarter. The company drilled 12 production wells, including seven wells at Kefa and five wells at Kahua in the quarter. As I have mentioned before, Increasing water handling capacity is key to Frontera's efforts to grow production at Kifa, where our current water handling capacity is approximately 1.6 million barrels of water per day in Kifa. In 2023, we began commissioning Sahara, our reverse osmosis water treatment facility, with an estimated 1 million barrels of water per day main-plane capacity. Every additional 100,000 barrels of water handled increases our net production at KIFA by 1,200 barrels per day. As of July of this year, the plan had processed 7.6 million barrels of water as part of its commissioning program. This is a five-fold increase in treated volumes compared to April of this year, providing irrigation source water to the companies nearby Proagollano's palm oil plantation. In Ecuador, Frontera's share of production was 613 barrels per day of medium fruit oil for the three months ended June 30th, compared to 1,005 barrels in the private world. On the Frontera-operated Perico block, we drilled the G2 appraisal well in July, discovering 48 feet of net pay in the lower New Sands and 24 feet net pay in the Eugene main formation. The well has been successfully completed with initial production rates of approximately 1,200 barrels of 30.5-degree API crude oil. Pre-dilling activities and civil works are on the way in advance of drilling the Handiagapu Exploration Well, which the company expects to spot this month.
Gabriel
Turning now to our midstream Colombian business.
Frontera
We continue our efforts to unlock shareholder value from our three core businesses. Building on Gabriel's earlier comments about the connection agreement between Porto Aire and Repicar, I would add that construction of the connection is expected to begin in the second half this year and take approximately 12 to 18 months to complete. at an anticipated total cost of approximately 30 million U.S. dollars. The connection will enhance Puerto Bahia's position as a strategic infrastructure asset and deliver additional revenue generation opportunities, not only for Puerto Bahia and Reficar, but also for the local communities of Baru and Cartagena and São Paulo. I would like to thank our partners at Refika and Ecopetrol for their dedication to completing the connection agreement with us and look forward to exploring the full potential of the connection in the coming months and years. Regarding our midstream business results, total ODL volumes pumped were approximately 243,000 barrels per day in the second quarter, up 8% compared to the first quarter. Puerto Aria liquid volumes were approximately 74,000 barrels per day during the second quarter of the year, up 17% compared to the first quarter. Adjusted midstream EBITDA in the second quarter was $30 million compared with $28.2 million in the first year. The increased quarter-over-quarter was driven by both higher volumes transported through ODL and higher throughput volumes in Puerto Aria liquids .
Gabriel
Now, our Galliana exploration business.
Frontera
As Gabriel mentioned, and as you are all aware, during the quarter, Frontera and CGS announced that the joint venture discovered 210 feet of hydrocarbon buried sands in the San Antonio horizon, confirmed by wireline logs and extensive core samples. The rock and fluid properties of the phantomion are currently being analyzed by an independent third-party laboratory to define NETPAID and a basis for the evaluation of these intervals. The JV also updated its previously announced discovery in the Maastrichtian and the Campanian intervals to 77 feet of NETPAID. Fluid samples were retrieved from the Campanian and Maastrichtian, indicating the presence of light crude in the Campanian and sweet medium crude oil in the Maastrichtian. The JV data acquisition program included wide-line logging, MDT fluid samples, and sidewall cores throughout the various intervals. Over the next two months, Results will be integrated into the geologic and geophysical models to form an updated view of the entire northern portion of the quarantine block. The northern portion of the quarantine block includes the channel complexes disposed by the Kawa 1 and Wei 1 wells, and a prospective central channel complex, which is yet to be evaluated. The JV is excited by the definite presence of oil in the Maastrichtian and Campania, and the presence of hydrocarbons in the Sanzoni, and believes there is a significant potential in the block. Speaking of Guyana, subsequent to the quarter, Proterra and CGX entered into an agreement to amend the quarantine block JOA between the companies. to cover the unexpected additional cost of the Wave 1 well due to delays associated with the late release of the rig by a third party, costs associated with a lost sampling tool, and the drilling of the bypass well. As a result of this agreement, if the maximum amount is transferred by CGX, the company will have 72.7% participating interest, and CGX will have a 27.3% participating interest in the block. I would now like to turn the call over to Rene Burgos, Frontera's CFO.
Gabriel
Rene.
CapEx
Thank you, Orlando. Also, thank you very much, Gabriel, for the introduction. And good morning, everybody. Thank you for participating. for the interest in our company and for your ongoing support. I'd like to take a moment to highlight a few key financial aspects of our second quarter results. In the second quarter, the company recorded net income of roughly $80 million, which compares with a net loss of $11.3 million in prior quarter. The company's second quarter net income included $35.5 million of net recovery from asset retirement obligations and improving expenses, resulting mainly from the company's sale of its interest and exit in the C1 block, and the corresponding reduction in asset retirement obligations related to such blocks. A $14.3 million in income from associates related to our interest in the OGL pipeline, any 17 million foreign exchange gains, including a 9 million realized gains related to our FX management program. These were partially offset by finance and income tax expenses of approximately 18.4 million. Operating EBITDA for the quarter was 116.5 million, compared to 92 million in the first quarter. This represents a 27% increase in quarter-over-quarter operating EBITDA, primarily as a result of higher sales volume during the quarter and the realized gain on our FSU's management contract. The company continues to actively manage its inventories in Colombia and expects to continue to benefit from an improved differential environment going forward. As of June 30th, the company had a total inventory balance of approximately 1.4 million barrels, including roughly 900,000 barrels in Colombia. This represents a decrease of around 200,000 barrels compared to Q1. On the cost side, production and transportation cost per barrel totaled approximately $14 and $11.40 respectively. This compares with $12 and $11.20 per quarter. The increase in cost quarter over quarter was primarily a result of foreign exchange impacts related to the almost 10% appreciation of the Colombian peso during the quarter. Also impacting higher energy and internal transportation costs and additional costs related to additional activity for services. I would like to provide a refresher on our cost exposure to the Colombian Peso. About 75% of our offer and 30% of our transportation costs are denominated in Colombian Peso. As I mentioned earlier, the Colombian Peso appreciated 10% during the quarter. Since then and through today, it has appreciated another 4%. The company has a top-down focus on cost control, and this includes ongoing review, for the prioritization of activities and to limit engagement to enact cost-saving methods, as well as a disciplined hedging program to help mitigate this impact of fluctuation. I will review key details of our hedging program shortly. Cash generation for the quarter was strong, with cash from operations totaling 184 million compared with approximately 1 million in the prior quarter. The increase in quarter-over-quarter cash provided by operating activities was primarily due to higher production, higher sales volumes, including inventory sales, and realized foreign exchange gains, partially offset by lower Brent oil prices. From an investment standpoint, the company spent $154.9 million in capital expenditures during the second quarter, including $72.8 million related to the Regina Wave 1 exploration well. Additionally, the company spent $26.7 million in debt service payments. I will take a second to give you a quick update on our investments related to our potential transformational grids and operations program. We expect to be in the lower end of the capital guidance of approximately $190 to $195 million. And as of the end of the second quarter, the expected additional cash outlays are estimated at around $40 to $50 million.
Gabriel
As of the second quarter, the company reported a total cash position of $214 million, compared to $183 million as of the first quarter of 2023.
CapEx
The company finished with a strong balance sheet and healthy credit metrics, including low LPM net leverage of 0.5 times. I would like to highlight during the quarter the company borrowed $20 million on their new working capital facility loan. The facility matures by December of this year. This working capital loan is an important milestone for the company, as it marks the first time that the company has successfully gained access to traditional bank funding markets in an effort to optimize its sources of capital funding. Lastly, I would like to also give you an update on our risk management strategy. Frontenac uses derivative instruments to manage exposure to oil price and foreign exchange volatility. Consistent with the strategy, the company entered into new put hedges totaling roughly 2.1 million barrels, or roughly 40% of artificial production for the year, and this will help protect a portion of the company's production through November at prices between $70 and $79 per grand barrel. From there, it has also entered into foreign exchange rate hedges, totaling roughly $120 million, or approximately 40% of our estimated pencil exposure for the second half of 2023. We've used zero-cost collars that protect the company at the 43 level, with a price cap above the 4,900 level Colombian pencil rate. We believe these provide the company with visibility and help mitigate future fluctuations and allow the business to deliver on its targets. I would now like to turn the call back to Orlando for his closing remarks.
Frontera
Thank you, Rene. Before I wrap up today's call, I would like to highlight that during the quarter, we released our 2022 sustainability report. We also announced that the company achieved 102% of its 2022 ESG goals. In 2022, we invested in 218 projects that benefit more than 73,100 people in Colombia, Ecuador, and Peru. We offset 52% of our greenhouse gas emissions. We reduce water consumption at our operations by 15%. We achieved a total recordable injury rate of 0.82 at our operation, and this is the best health and safety performance in Frontera's history. I'm incredibly proud of the entire Frontera team for their dedication to safe operations. For 2023, we have set ambitious ESG targets. We aim to neutralize 50% of our greenhouse gas emissions through carbon trades. We plan to inaugurate our first solar farm at CP6. We will continue commissioning our Sahara Water Treatment Facility at PFAN, and we aim to recycle 15% of our operational water use. And we aim to preserve an additional 1,000 hectares of biological corridors in Casanare and Meda. With that, I would like to conclude by saying thank you to for the comments, and thank you, everyone, for attending our call. I will now turn the call back to our operator. We will open the call up for questions.
Rene
Thank you.
Operator
Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 1. If you want to withdraw your question, please press star 2. Your questions will be pulled in the order they are received. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please while we just compile the Q&A roaster.
Gabriel
Your first question comes from from Bank of America.
Operator
Please go ahead.
spk00
Good morning, good afternoon. Thank you very much for the call and congratulations on good results. My first question has to do with the linking of the Porto Valle liquids terminal with Reficar. Congratulations. I think that's something you've been focused on for a long time. My question is, is there any commitment on the part of Reficar or Ecopetrol to to use this in any capacity, or will you be looking for contracts from third parties? That's my first question. I don't know if you want to answer that, and I have two others.
Frontera
Why don't you go ahead with the other ones?
spk00
Okay, so the second question is, I just didn't get all of the information when you talked about the water treatment capacity, particularly at KEFA. I think you said that for Every 100,000 additional, I want to say, is it barrels or gallons of water treatment, you can increase oil production by 1,200 barrels per day. And I think you might have already achieved something there. So I just wanted a little bit of clarification on that. And then the third question is just on Guyana. I know you said you're currently evaluating all the results that you have. what are the different options after two months? Is it possible that you will make additional investments there, or are there a variety of options you're looking at?
Frontera
Okay, let me start. Thank you for the questions. Let me start with the first one, addressing the Puerto Vallarta connection with Reficar. Well, as I mentioned, I mean, these are significant value creation opportunity for the company. So we are very excited about that. We still have 12 to 18 months to go to build the pipeline that connects the two facilities. There is a growing opportunity given the expansion of the refinery. in Cartagena, which will need additional volumes to be refined in the facility. There is a take and pay agreement. Rates have been already negotiated. And again, these are very exciting opportunities. It's a significant value creation opportunity for the company. On the second question, yes, is every 100,000 of water that we can handle in the Sahara facility, there is an increase of 1,200 barrels net production. So that is a number net for Frontera, 1,200 barrels per day. So every 100,000, implies 1,200. So that is for Frontera on a net basis. The facility, as it is designed, is going to benefit KIFA, the KIFA Association, but also the Rubiales Association, the Rubiales field. But at the end, the benefit for Frontera is 1,200. And I think the third question was about Guyana. Yes, as we mentioned, we are in the process of finalizing all the information that we got from the well. It is very positive that we got significant new additional data from the well. And as we move forward, we, of course, will consider different strategic options, as we have indicated before, for the quarantine license.
Cartagena
Okay, great. Thank you.
Rene
Thank you. Your next question comes from Roman Rossi from Canaccord Genuity.
Operator
Please go ahead.
spk03
Good morning. Thanks for taking my questions and congratulations on the deal you closed this quarter. I have a couple just on Gushana. So I see that you changed your CapEx guidance. So I assume this is just related to Gushana, right? And then the second one is related to the pending technical information for the well. What are you expecting to have the net pay for the primary targets?
Frontera
Can you repeat your first question, the first part on CAPEX?
spk03
Yeah, because it seems you changed your CAPEX guidance for 2023, right?
Frontera
No, no, we haven't changed the CAPEX guidance for 2023. No, this is still the same.
CapEx
From the original guidance, we updated our guidance related I think it was in May, June, because of the additional cost that we discussed in the prior call. But we have not updated guidance. And what I alluded in my notes was that we expect to be in the lower range of the updated guidance for Guyana of between $190 to $195 million.
Gabriel
Was that a question?
spk03
And regarding the technical information?
spk12
Yeah. So, yeah, thanks for the question. Basically, as we indicated before in the previous press release that we made on the web results, we are going to take two to three months to finalize all the integration. Basically, we still are going to be within that timeframe. We are making progress on preparing the data by third party. But then, as we alluded also before, we have a lot of data, not just for the for the Campanian, but also mainly for the San Antonio. There's a lot of information that we have to analyze and integrate. So we are, you know, on track, and we are making good progress. We have a lot of data, and we are with the same timeframe that we had indicated before for the two to three months after the release of the information.
Gabriel
Okay. Thank you very much.
Rene
Thank you. Your next question comes from Jacob Stainfield from Ashmore.
Operator
Please go ahead.
Jacob
Hi, good morning. Congrats on the results. I had two questions. The first one was on the NCIB. I think it expired in March. Can you talk about whether you're planning on renewing it or whether you're able to repurchase stock? That's my first question. And the second one's just on You could just go over your sort of capital allocation plans for the second half of the year in terms of how much CapEx you have remaining and any other plans in terms of capital use and whether this agreement with on Refrocar and the port changes your CapEx times for the rest of the year.
CapEx
Those are really good questions. And thank you, Jacob, for your first question about the NCIB. I think that we have said before that we are extremely focused on unlocking value for our stakeholders, and that for us has taken multiple different avenues. This year, the focus has still been on key investments into our platform, including the significant investment in CD6, the investments related to our potential transformational exploration program. to the extent that we have any update on additional NTID activity that remains to the board's discretion, and we'll keep the market appraised and updated as it actually comes through. But again, the focus is on value creation for our stakeholders, and clearly, NTID has been a significant use of that. On the guidance, our guidance remains the same. I think year-to-date, we allocated roughly $286 million. So you should expect to see the remainder of that being consumed. As it relates to the connection, I would say two things. The timing of the cash flow doesn't necessarily kind of tie together with the current guidance that we have today. There will be some additional expenditures that we will need to do. But as you may recall, we did have funding allocated as part of our original a refinancing initiative with Puerto Vallarta that would allow us to fund that investment directly from those sources. So that would be the update that I would share with you, Jacob. I can clean up my answers if you want to clarify any other questions that I could address for you.
Jacob
Okay. Just two quick clarifications. So you didn't purchase any stock in the second quarter?
Gabriel
No, we have not. Okay. Right.
Jacob
Okay. And then on this take or pay that you mentioned, maybe it's too early to say, but do you know what the financial impact would be for the midstream business once it's up and running?
CapEx
Look, this is not a take or pay. It's a take and pay. We have the We believe that, again, I think what Orlando alluded to is this connection should provide additional economic activity of all sorts into the bay, and particularly into our port. So we would expect that this would certainly have a very important impact. And as we start refining numbers, we will give the market a quicker update, you know, on these matters. And we expect to do that shortly. Great.
Gabriel
Thanks.
Rene
Thank you.
Operator
Your next question comes from Oriana Cobalt from Balance. Please go ahead.
Oriana Cobalt
Hi, thanks for taking my question. This is Oriana Cobalt with Balance. I had a follow-up with regards to production and perhaps key drivers for the second half of the year. Just looking at your light and medium crude production and as well as your Ecuador crude production drop during the quarter and natural gas. So just to understand, of the moving parts and how should we expect for light and medium crude to recover perhaps to average levels seen in 2022? And if this natural gas volumes should be like the new normal going on, or what should we expect from that end? Thanks.
Frontera
No, I think the expectation, thank you for the question, the expectation is that Certainly, we are very comfortable that we will be within the guidance that we provide to the market. As we have indicated, we are having positive results in the second quarter in terms of our capacity to increase water handling in the heavy oil field. We saw doubling the capacity in the CP6. We had achieved record production at CP6. And so very positive results there. There is a good indication that we also provide to in our press release about the appraisal well that we finished the G2 well in the Perico block that Frontera operates. And so no more to say on that at this point in time, given that it is coming from production since yesterday. And we continue to manage the client in our light-medium oil assets. So, again, there is no change in the guidance, and we feel very comfortable about that.
Oriana Cobalt
Great. Thank you. And maybe just one clarification, going back to the capex needs, and I'm understanding that due to some timing of cash flows that wouldn't necessarily match your capex, you might see some additional cash outlays. clarify in which order should we see it, and if this is only due because of the increased participation in quarantine, and or also because of some initial payments associated with the Reficar connection. Thank you.
Frontera
So what is the... Yes, no, I'm just thinking of the timing of cash
Oriana Cobalt
because you haven't made any changes or updates to your four-year CAPEX after June. That was completely clear. But you have this REFICAR announcement and you mentioned some additional cash outlays through the year. So should we expect any changes going forward? And what could explain this is because of the increased participation in quarantine, like a marginal increase there over this transfer of 4.7% participation. Just to understand if this CAPEX figure that we're seeing through the remainder of the year should stick.
CapEx
So let me just provide this clarity. So if you go to our FDNA and you look at our guidance, we have not updated our Colombia and equal to the guidance expenditures. There's been no change there. Also, there has been no change in the Guyana exploration because that guidance already reflects our expected total investment of around $190 to $195 million. Yeah, but remember that we spent . So the numbers are a little different.
Frontera
BUT THE FACT THAT WE ARE INCREASING OUR PARTICIPATING INCREASE IN THE CURRENCY LICENSE DOESN'T .
CapEx
EXACTLY. AS RELATED TO MY COMMENT ON THE CASH OUTLAYS, WHAT I WANTED TO PROVIDE CLARITY WAS WHAT IS THE REMAINING AMOUNT OF CASH THAT WE NEED TO DISBURSE FROM THE SECOND QUARTER ONWARD TO FINISH THE INVESTMENT IN GUAYANA ACCORDING TO OUR GUIDANCE? OKAY. OKAY. I HAVE A QUESTION ON THE FORWARD. There could be some amount of capex this year, but that amount of capex would be relatively small, and it would impact our guidance because the construction period now begins. So I, we would expect to provide you guys with better clarity on that, you know, probably during the next call. But as of right now, it does not change my guidance, you know, with respect to the capex.
Oriana Cobalt
Perfect. That's very clear. Thank you very much, guys.
Operator
Thank you. Thank you. Ladies and gentlemen, as a reminder, should you have a question, please first start one on your telephone keypad. Your next question comes from Sarah Constantine from Summer Moon. Please go ahead.
Sarah Constantine
Hi, good morning. Congratulations on the great quarter. I had basically two questions since some of mine have been previously answered. So my first one is, Clearly, the market is kind of undervaluing your company on a sum of all parts. You know, you have three main businesses, and it seems like they're fairly heavily discounted when you look at your market cap. Has there been any consideration of taking your midstream business and spinning it off as a separate entity and having its own, I guess, ticker symbol? And I guess my second question is, given elevated rent pricing, I know previously you all had had more significant puts in place to protect your cash flow? Have you considered potentially putting in a more year-long schedule for puts to maintain the $80-plus Brent pricing? Thank you.
Frontera
Let me take the first one, and you can take the second one. On your first one, it's a good question, and the way I would answer that is that we are permanently looking at opportunities and strategic options to maximize value for our shareholders. And definitely, as you said, some of the parts of our three core businesses are not reflected in the market cap of the company. And as you could see, we are delivering on the three core businesses. So the upstream, Colombia and Ecuador, we are giving our guidance in terms of cost, production, EBITDA, at $80 of rent. We have positive developments in the midstream segment. We also have significant progress on the Guyana side. So we are delivering on the three core businesses of the company. And certainly, the solid parts doesn't affect the current value that the market recognized. So we are, I mean, permanently, and believe me, as management and our board, looking to those opportunities to fully maximize the value for our shareholders.
CapEx
And on your hedging question, it's a great point. I would add that we are very pragmatic with our hedges. So that is, you need to strike a balance between the cost of the hedge and the effectiveness of the hedge. So what we try to do, and I think what we've done through this year is, you know, provide certainty into our cash flows, particularly in a year that included a significant amount on investment programs. We will continue to exploit that because I do believe that it helps providing visibility to ourselves as managers, but also you guys as our investors. And if the timing is correct and the tentacles work, we would love to enter into longer-dated hedges, but right now we're kind of striking the proper balance between right price, budget,
Gabriel
and kind of value. All right. Well, thank you very much.
Rene
Thank you. Your next question comes from Christine Guerrero from Brick House Ventures.
Operator
Please go ahead.
JD
Hello. Yeah. My questions were regarding the quarantine license itself in Guyana. So the first question is, what is the total accumulated sunk cost in the license to date that would be recoverable if this license rolls into a production license? And also, you've currently fulfilled all your commitments on the exploration stage of the license. How much time do you have before the license converts over to a production license? And I'm assuming that there would have to be a commitment then to bring a development on. And, again, that's an assumption. So I'm looking for clarity from you on what the process is going forward for this license if you continue to hold it.
Gabriel
Well, I think the way I, sorry. I would, let me start, thank you for your questions. I think, I mean, my first reaction would be, as we said, we are, we are,
Frontera
I mean, analyzing the significant amount of data that we got from the world. So that will take, as was indicated before, like a couple of months. So that will give us a better perspective on the block, on the potential of the block, and how to move into the following phases, to say something more i mean to say something more than that is is going to be i mean difficult at this point in time and as i said i mean we have indicated before we normally i mean permanently look into into strategic options for for for the quarantine for the quarantine block but that is that is where we are concentrated right now and any any potential move after this phase will be subject to the analysis that we are conducting, to the results of the analysis that we are conducting today.
JD
Yes, but again, like I'm just wondering what the sunk cost is today, because if this does roll forward, that is going to be recoverable. So I know you can't give me a resource potential right now, but you should be able to give me what the sunk cost is.
CapEx
Look, I can say that, and it's in our financial statement, that JV, and we consolidate JV as of 2019, we've invested roughly $440 million in Guyana. That should give you a sense of investment into a particular core intent block, more or less.
JD
So that would include the three wells, because I'm looking back to EGLE, because I'm assuming EGLE would also be cost recoverable.
CapEx
This is only the aggregate number that we have related to the CGX. Remember, we consolidated CGX following 2019. Some of the other investments were repaired and no longer are sitting in the balance sheet. So I'm just giving you a balance sheet that comes today. We include roughly $440 million of assets in Guyana, which include, I would say, roughly $400 million in investments in our two wells, which is the Way One well and also the Cabo One well. And there will be another X amount of investments related to the port. I'm just giving you a number just to get a sense of the capital invested following the JD into the two key exploration program wells that we've done since 2019.
JD
Okay, yeah, I just, because, you know, at one time, Suresh Narain, the CEO of CGX, had mentioned that $700 million had been spent, and I'm trying to figure out what portion of the $700 goes to quarantine.
CapEx
So why don't we take it back internally, and maybe we can follow up with you. It's a good question, Christine, so we'll get back to you.
Cartagena
Yeah, okay, thank you.
Gabriel
Thank you.
Operator
There are no further questions at this time. Should you have any further questions, please email IR at FroteraEnergy.ca. This concludes the call. Thank you all for participating.
Gabriel
If you can answer that question.
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