HES - Frontera Energy: Market Confusion

2024-06-03 05:21:50 ET

Summary

• Frontera Energy's management lacks patience and a consistent business strategy, which is not good for shareholders.
• The company's bond prices are weak, reflecting uncertainty and causing concerns in the bond market. Until this is resolved, it will impede stock price progress.
• Frontera's strategy to achieve value through strategic alternatives may not work due to a lack of willing buyers. The "now" part of that strategy could result in a large discount.
• There are now two pieces of the business on the table with a "value achieving" goal through "strategic alternatives".
• Management has been vague about backup plans if the current strategy does not work. Bondholders are fearful about a loss of assets that generate income.

Ever since I began publishing articles, including the last one , about Frontera Energy ( OTCPK:FECCF ), I have stressed the importance of both patience and consistently applied business strategy. This management appears to have neither, which is not good for shareholders. Now management has announced an initiative to get value for some of the Colombian infrastructure as they believe it is undervalued. But later in the first quarter report, management notes some protests interrupted production and caused a total production decline. As a result of all of this, there are other companies I follow that handle this type of situation much better and realize more value for shareholders. For me, this remains a sell (or even a strong sell) as there are better choices out there.

Bond Prices

One general axiom is that stock prices go nowhere if bond prices are weak. That prompted the first question during the conference call ....

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