Frontera Resources Releases First Half 2012 Financial Results and Operations Update
FRONTERA RESOURCES CORPORATION
Houston, Texas, U.S.A. – 27 September 2012
FRONTERA RESOURCES RELEASES FIRST HALF 2012 FINANCIAL RESULTS
AND OPERATIONS UPDATE
Frontera Resources Corporation (London Stock Exchange, AIM Market – Symbol: FRR), an independent oil and gas exploration and production company (“Frontera” or the “Company”), today released financial results for the first half of 2012, as well as an operations update.
2012 Half Year Results: Highlights
- Net loss of US$4.4 million (2011: US$11.2 million), or US$0.002 per share on fully-diluted basis (2011: US$0.08 per share).
- Reduction in interest expense to US$1.2 million (2011: US$8.2 million) reflects significant reduction in Company debt to US$23.3 (2011: US$128.5 million).
- Crude oil sales of US$3.3 million (2011: US$3.1 million).
Mtsare Khevi Gas Complex:
Following the update released on 31 July 2012, the Company has continued to make progress towards the installation of gas sales infrastructure in the Mtsare Khevi Field. Equipment has been procured, mobilized, and is stacked in the field and in key staging areas awaiting final issuance of certain remaining requisite permits relating to the installation of the 8 km pipeline and related facilities from the Georgian government. An update will follow in due course with further information as such final approvals are obtained.
This infrastructure will accommodate production from currently shut-in gas wells which could produce approximately 2 million cubic feet per day (57,000 cubic meters per day) with a potential commensurate uplift in revenue of approximately $500,000 per month from the field, at today’s prices once sales commence. An update will follow in due course once these gas sales have commenced..
The Mtstare Khevi Field is situated within a larger play of approximately 80 square kilometres referred to as the Mtsare Khevi Gas Complex and encompasses gas targets found between 300 meters and 5,000 meters in depth. Based on Frontera’s internal estimates, analysis has revealed significant gas potential throughout this area of as much as approximately 1.2 tcf of gas in place (28 billion cubic meters) and approximately 700 bcf of recoverable gas (19.8 billion cubic meters).
Preparation continues at Taribani Field for commencement of a 4 well drilling campaign. The Company is continuing its negotiations with strategic financing partners for development of this large field prior to commencement of operations on a 4 well campaign designed to continue exploitation of Zones 9, 14, 15 and 19 within the field. Subject to completion and associated availability of funds, drilling operations at the field will commence, with the re-entry, sidetrack and frac-completion of the Niko #1 well. When Frontera originally drilled and tested the Niko #1 well, it flowed at a peak rate of 960 bopd and produced 10,400 barrels during its forty day production test. However, production was suspended as a result of a poor completion and failed packer. Today, reservoir performance modeling by Frontera from this planned operation predicts a “most-likely” case of approximately 1,000 bopd.
In addition, after recent completion of new analysis of existing wells in the field, Frontera now plans to side track the T-#31 and T-#16 wells in order to apply frac-completions to Zones 14 and 15, as well as drill the new T-#46 well location with similar frac-completion in the same target zones. These wells are expected to deliver daily production rates of 300 bopd each.
In total, the 4 well program is expected to add approximately 1,900 bopd or about $5.9 million in revenue per month at today’s oil price.
The Taribani Field is a very large oil accumulation with 788 million barrels OOIP independently assessed by Netherland, Sewell & Associates (NSA) 2005 for Zones 9, 14, 15 and 19. NSA assigns a 15% recovery factor giving “Technical Possible Reserves” of 118 million barrels for the field. An additional 36 million barrels are assessed as un-risked Prospective Resources in five deeper zones in the field.
At the Mirzaani Field, new drilling operations have been designed to advance work in the undeveloped northwestern portion of the field. Discussions are in progress to secure a financing package to commence a 5 well program in the field, with individual wells each expected to deliver approximately 100bbls per day, generating new revenue of approximately $1.5 million per month at today’s prices.
The Mirzaani Field, which Frontera operates with 100% interest, is located in the eastern portion of the Shallow Fields Production Unit amidst a complex of several existing oil fields. Discovered in 1932, the Mirzaani Field has historically produced oil from a small developed portion of the field but contains extensive undeveloped and underdeveloped areas. After acquiring approximately 100 kilometers of new 2D seismic data as part of an effort to re-map and identify new potential associated with the field, Frontera drilled the Mirzaani #1, #2 and #5 discovery and appraisal wells, which were the first wells to be drilled in the field since the Soviet-era.
NSA have assigned a “Best Estimate” for gross original oil-in-place for the Mirzaani Field and Mirzaani Northwest Extension of 541.7 million barrels, with a “low”-to-“high” range of 343.8–857.3 million barrels; and a “Best Estimate” for remaining recoverable gross contingent and unrisked prospective oil resources of 43.8 million barrels, with a “low”-to-“high” range of 20.5–86.1 million barrels. This assessment is consistent with Frontera’s internal estimates.
Basin Edge Play Unit:
Analysis has continued associated with Frontera’s historical work relating to the Basin Edge “A”, “B” and “C” prospects with ongoing studies in progress that are designed to enhance future drilling success. New well locations have been identified for the future appraisal and exploration of these prospects. Additionally, discussions are in progress with a potential strategic partner for the continuation of efforts to tap this play’s giant prospectivity.
The Basin Edge Play Unit is located along the northern border of Block 12 and represents what the Company believes is one of the newest and potentially most prolific exploration plays in the Upper Kura Basin, with very large potential structures in Cretaceous carbonate reservoirs. In 2005, NSA estimated total unrisked prospective resource potential to be in excess of 680 million barrels within the primary Cretaceous and secondary Miocene (Sarmatian) reservoir targets of two major prospects in the play (“B” and “C”).
Shale Gas Play Unit/Unconventional Reservoir Studies:
Studies continue across a potentially prospective area associated with the regional Maykop shales within Block 12. Work to date has expanded the area of focus across all of Block 12 for the study of what is hypothesized to be significant unconventional reservoir potential that could be exploited from the regionally present targets. Potentially similar to extensive plays in North America and Europe, study work to further define the play’s prospectivity are in progress.
Greater Black Sea Strategy:
Earlier this year, Frontera signed a Memorandum of Understanding (MOU) with the State Service For Geology and Mineral Resources of Ukraine that opened the way to provide Frontera with the ability to select an area for exploration and production work in the country. Work is in progress to secure a new license and establish an operating presence in the country. Frontera’s objective is to build on its extensive regional geologic knowledge and extend its efforts to the west through the acquisition of an expanded exploration and production portfolio.
Steve C. Nicandros, Chairman and Chief Executive Officer, commented:
“We have continued to advance our objective of increasing revenues and profitability in the near term, while continuing to build significant value across our extensive portfolio in Block 12 and our Greater Black Sea Strategy. I look forward to reporting our progress in due course as we continue to add meaningful value to our company’s existing and new holdings.”
Frontera Resources Corporation
Vice President, Investor Relations and Corporate Communications
Nominated Adviser and Joint Broker:
Matt Goode / Chris Raggett
+44 (0) 20 7220 0500
Cornhill Capital Limited
Nick Bealer / Stefan Olivier
+44 (0)20 7710 9610
Tim Thompson / Helen Chan/Tom Hufton
+44 (0)20 7466 5000
Notes to Editors:
1. 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 currently operates in the country of Georgia where it holds a 100 percent working interest in a production sharing agreement with the government of Georgia. This gives Frontera the exclusive right to explore for, develop and produce oil and gas from a 5,060 square kilometer area in eastern Georgia known as Block 12. Frontera Resources Corporation shares are traded on the London Stock Exchange, AIM Market – Symbol: FRR. For more information, please visit www.fronteraresources.com .
2. Information on Resource Estimates: The 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). The full report, dated July 1, 2010, is available at www.fronteraresources.com . 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 the statements in this announcement.
3. 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.