Frontera Energy - CEO, Richard Herbert
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  • Frontera Energy (TSX:FEC) announced that operations at Block 192 in Peru have been hindered after a community blockade impacted power to the site
  • The company believes the backlash is related to a six-month extension to the operation, which was granted last week
  • Frontera Energy has declared a state of force majeure, absolving the company and state-owned Petroperu S.A. from the terms of the extension
  • Frontera has stated it is unsure when operations will fully resume
  • Frontera Energy Corporation (FEC) is down 26.38 per cent, with shares trading at C$4.44 and a market cap of $497 million

Operations at Frontera Energy’s (TSX:FEC) Block 192 oil well have been hindered after a community blockade impacted power to the site.

The company believes the community blockade is directly related to a six-month contract extension for Block 192.

The previous contract was due to expire this month and the extension would maintain operations until September, while a new contracted was negotiated.

Frontera Energy declared a state of force majeure as it was unable to fully restart operations amid the community backlash and power blackout. As of yet, the exact nature of the blockade and the power outages remains unclear.

A force majeure clause is often included in contracts. It absolves a company if they’re unable to fulfil obligations due to unforeseen or overwhelming circumstances.

Perupetro S.A. has accepted the clause, which means all parties involved will not be held accountable to the block’s inactivity.

This could mean that the six-month extension may not take affect until operations restart and then extend past its original end-date. However, Frontera is still unsure when the clause will be lifted.

Frontera Energy previously predicted the block could produce up to 8,500 barrels of oil per day. However, the block has been producing an average of 7,100 barrels due to the ongoing community unrest.

The block has been further affected by frequent disruptions to the Norperuano Pipeline. The pipeline is operated by Petroperu, a state-owned oil company, and has been criticised for frequent spills in surrounding area.

As a result of chronic protests and attacks, the pipeline has been frequently shut off, which has severely impacted production at Block 192.

This news arrives on the oil industry’s worst day in recent times. A substantial cut the oil price is having severe knock-on effects across the globe.

Oil price benchmarks, the West Texas Intermediate Crude and the Brent Crude, have both dropped around 18 per cent.

Frontera Energy Corporation (FEC) is down 35.65 per cent, with shares trading for C$4.44 at 9.57 am EST.

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