FRONTERA RESOURCES CORPORATION
Houston, Texas, U.S.A. – 30 June 2016
FRONTERA RESOURCES RELEASES 2015 ANNUAL RESULTS
Frontera Resources Corporation (AIM: FRR), an independent oil and gas exploration and production company (“Frontera” or the “Company”), today releases its audited final results for the year ended 31 December 2015.
2015 Annual Results: Highlights
– Revenues from crude oil and gas sales for 2015 totaled $3.7 million.
– Net loss of $20.5 million, or $0.007 per share on a fully diluted basis. Of this total, approximately $5 million is reflected in one-time charges associated with recorded impairment and inventory related accounting due to significant decrease of crude oil prices.
Since the Company’s announcement on 16 May 2016, ongoing technical study of results from workover, drilling, and stimulation completion programs associated with its ongoing Oil Window and Gas Window operations at its South Kakheti Gas Complex and Shallow Fields Production Unit have provided the basis for design and implementation of an accelerated and more technically advanced work program over the remainder of this year and next year. The Company expects that this planned program will result in increased revenue from exploration related pilot production programs for oil and gas.
As announced in the Circular issued on 10 June 2016, the resolutions of which were duly passed at the General Meeting held on 28 June 2016, the Company will progress its planned work programs by undertaking the following:
(1) Completing service agreements with two strategic service providers in Georgia (“Service Providers”) whereby the Company will procure an aggregate US$4,000,000 worth of oil field services in support of its planned 2016 and 2017 Work Programs from the Service Providers in exchange for the issuance of new Ordinary Shares in the Company issued to the Service Providers. The number of shares to be issued will be determined based on an average of the daily volume weighted average prices of the shares traded during the 15 consecutive trading days beginning on 28 June 2016. To date, the Service Providers have become strategic alliance members of the Company’s on-going operations. In this context, the Service Providers provide key oil field services that permit the Company to advance its work in the most cost efficient manner possible in contrast to mobilizing similar services from outside of Georgia and/or building associated in-house capabilities. The Service Providers will provide: i) supporting equipment and labor, including up to four drilling and workover rigs; ii) transportation services for handling/moving produced oil and associated liquids within field processing operations; iii) maintenance services for oil and gas transportation infrastructure and access roads; and iv) maintenance services and operational support of Company owned oil field equipment.
(2) The Company has entered into financing agreements with YA II PN, Ltd., formerly known as YA Global Master SPV Ltd. (“Yorkville”), dated 28 June 2011, 27 January 2012 and 31 December 2013 (as amended from time to time), that provide for a standby equity distribution agreement and related convertible debt financing for up to approximately US$31 million (£21 million) of available equity/debt investment. The Company will work with Yorkville to make approximately US$14 million available over the next six months. The Company will use these funds to:
(i) purchase approximately US$4 million of additional oil field equipment to expand the Company’s current fleet in order to undertake larger well-stimulation completions in the planned Work Programs. This will include acquisition of frac/pumping units; a frac blender and other associated equipment, and; a workover/drilling rig.
(ii) provide approximately US$10 million of working capital in support of the Work Programs as well as costs associated with this transaction.
In addition to the above programs, the Company is in the process of addressing financing associated with outstanding debt that will this year mature related to convertible note holders and executive management loans to the company. As plans are finalized, updates will be provided in due course.
Greater Black Sea Strategy: During July of 2015, Frontera and Naftogaz initiated cooperation to work together in upstream exploration and production projects in Ukraine, as well as to study the possibility to bring liquefied natural gas to Ukraine from Frontera’s ongoing work in Georgia.
Joint work has advanced and has now further evolved the upstream focus of this cooperation. Frontera has continued to progress studies related to the evaluation of upstream exploration and production projects in Ukraine and, with the addition of a new Memorandum of Understanding (“MOU”) that was signed in February of this year with Ukraine’s public joint stock company UkrGasVydobuvannya (“UGV”). Efforts are ongoing to acquire specific license areas. The MOU that was signed earlier this year served to create a more detailed framework of technical and commercial cooperation between Frontera and UGV in order to move towards implementation of joint work in specifically targeted upstream exploration and production projects in Ukraine.
Steve C. Nicandros, Chairman and Chief Executive Officer commented:
“During 2015 and during the first half of 2016, Frontera has continued to invest in a focused manner in our exploration work programs in Georgia that are designed to unlock the value associated with the significant oil and gas potential that our historical investments have identified. Amidst a depressed commodity price environment for the oil and gas sector, we nevertheless remain diligent to capitalize on the ongoing technical progress that our investments continue to highlight.
At the same time, political challenges in Georgia’s domestic gas market continue to delay related investment due to the Ministry of Energy’s discouragement of ongoing exploration of domestic natural gas resources in favor of preserving existing gas import monopolies. As efforts are ongoing to address the Ministry’s opposition to this work, we are hopeful that it will ultimately see the benefit of allowing for a free and competitive market for U.S. and foreign investment in its domestic natural gas sector that today does not exist.
Overall, we look forward to progressing our work programs in Georgia and the Greater Black Sea region as we believe the company remains uniquely positioned to achieve near and long term growth from its efforts in Eastern Europe.”
Frontera Resources Corporation
Cairn Financial Advisers LLP
61 Cheapside, London EC2V 6AX
Jo Turner / Liam Murray
+44 (0) 20 7148 7900
Cornhill Capital Limited
+44 (0) 207 710 9610
Ben Romney/Hannah Brandstaetter
+44 (0) 20 7466 5000
Notes to Editors:
About Frontera Resources Corporation
Frontera Resources Corporation is an independent Houston, Texas, U.S.A.-based international oil and gas exploration and production company whose strategy is to identify opportunities and operate in emerging markets in Eastern Europe around the Black Sea. Frontera Resources Corporation shares are traded on the London Stock Exchange, AIM Market – Symbol: FRR. For more information, please visit www.fronteraresources.com.
1. Information on Resource Estimates: The independent contingent and prospective resources estimates contained in this announcement were determined by the independent consulting firm of Netherland, Sewell & Associates (NSA) in accordance with the definitions and guidelines set forth in the 2007 Petroleum Resources Management System (PRMS) adopted by the Society of Petroleum Engineers (SPE). Internal resources estimates were determined by the Company. Gerard Bono, Frontera’s Vice President and Chief Reservoir Engineer, who is a member of the SPE, is the qualified person who reviewed and approved both independent and internal estimates in this announcement.
2. This release may contain certain forward-looking statements, including, without limitation, expectations, beliefs, plans and objectives regarding the transactions, work programs and other matters discussed in this release. Exploration for oil is a speculative business that involves a high degree of risk. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: risks inherent in oil and gas production operations; availability and performance of needed equipment and personnel; the Company’s ability to raise capital to fund its exploration and development programs; seismic data; evaluation of logs, cores and other data from wells drilled; inherent uncertainty in estimation of oil and gas resources; fluctuations in oil and gas prices; weather conditions; general economic conditions; the political situation in Georgia and relations with neighboring countries; and other factors listed in Frontera’s financial reports, which are available at www.fronteraresources.com. There is no assurance that Frontera’s expectations will be realized, and actual results may differ materially from those expressed in the forward-looking statements.
3. Glossary of Terms: BCF – means Billion Cubic Feet of gas. TCF – means Trillion Cubic Feet of gas. Mcf – means Thousand Cubic Feet of gas. OOIP – means Original Oil in Place. Bopd – means Barrels of Oil Per Day.