Frontera Resources Releases Operations Update
FRONTERA RESOURCES CORPORATION
(“FRONTERA” OR THE “COMPANY”)
Houston, Texas, U.S.A. – 7 December, 2012
FRONTERA RESOURCES RELEASES OPERATIONS UPDATE
Frontera Resources Corporation (London Stock Exchange, AIM Market – Symbol: FRR), an independent oil and gas exploration and production company, today released an operations update for its holdings in the country of Georgia as well as its Greater Black Sea strategic initiative.
Oil production for third quarter of 2012 totaled approximately 20,000 bbls.
Mtsare Khevi Gas Complex:
As detailed in the Company’s announcement of 27 September 2012, the Company is awaiting final issuance of certain remaining requisite permits relating to the installation of the 8 km pipeline and related facilities from the Georgian government prior to the installation of gas sales infrastructure in the Mtsare Khevi Field. The equipment required for the pipeline has been procured, mobilized, and stacked in the field and in key staging areas awaiting issuance of the remaining requisite permits. Once the permits are received, it is expected that the pipeline will be installed, and hence the gas sales are expected to commence after the gas pipeline is put into operation. An update will follow in due course with further information as such final approvals are obtained. The infrastructure will accommodate production from currently shut-in wells which the Company believes could produce approximately 2 million cubic feet per day (57,000 cubic meters per day).
The Mtstare Khevi Field is situated within a larger play area 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 up to approximately 1.2 tcf of gas in place (28 billion cubic meters) and up to approximately 700 bcf of recoverable gas (19.8 billion cubic meters). An integrated geologic study, including data from a number of existing wells within the area such as the V-#18 well, previously referenced in the Company’s 31 January 2012 announcement, is currently in progress to better understand and define the extent of this potential throughout the greater Mtsare Khevi Gas Complex.
As a result of the delay in commencing gas production this year as well as the ongoing integrated study associated with the greater area, the Company now expects to commission a new competent person report on the Mtsare Khevi Gas Complex in 2013 after gas production has commenced and the integrated study is finished.
Preparation continues at Taribani Field for commencement of a 4 well drilling campaign. As announced on 27 September 2012, the Company is continuing its negotiations with strategic financing partners for development of the Taribani 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. Although negotiations are progressing, the Company does not now anticipate that they will be finalized and financing will be in place in time for drilling to commence prior to the end of this calendar year as the Company had previously expected. Operations are now expected to commence in 2013, subject to completion of a suitable financing package.
When operations commence, plans are to begin 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. The Company believes that the wells can achieve daily production rates of 300 bopd per well from these three wells. Based on analysis of ongoing work at the Taribani Field, a new geologic study initiative has commenced across an area referred to as the Taribani Field Complex. This is an area that encompasses approximately 1,400 square kilometers and includes the discovered yet undeveloped Taribani, Kila Kupra, Bayda and Iori fields within Block 12. Study work is designed to reassess the extensive potential associated with this complex and determine if the fields are interconnected within the complex as part of a significantly more extensive unconventional reservoir play for oil.
The Taribani Field is a 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, the Company has planned a 5 well drilling campaign with the intention of exploiting the undeveloped northwestern portion of the field, with individual wells each believed to be able to deliver approximately 100 bbls per day. As announced on 27 September 2012, The Company is in continued discussions with a potential funding partner to secure a funding package to commence the drilling program but it is now not expected that the negotiations will conclude in time for drilling to commence by the end of this calendar year as previously anticipated. Subject to completion of financing arrangements, operations are now expected to commence in 2013.
The Mirzaani Field 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.
In 2010, NSA 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 continue with a potential strategic partner for the continuation of efforts to tap this play’s 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 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. The Company believes this unit could potentially be similar to certain plays in North America and Europe and 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.
The Company announced on 31 January 2012 that it had entered into a loan agreement (the “Loan Agreement” with YA Global Master SPV Ltd, an investment fund managed by Yorkville Advisors LLC to provide up to US$3.1 million in cash to the company in support of ongoing work programs. As detailed in the announcement, the first installment of US$1,100,000 (less implementation costs and an implementation fee of US$75,000) was advanced in early February 2012. The Company now confirms that the second installment of the Loan Agreement of US$2,000,000 (less implementation costs and an implementation fee of US$150,000 was advanced in June 2012, as anticipated by the announcement on 31 January 2012. The second installment of the Loan Agreement was reflected as a liability in the Company’s balance sheet as at 30 June 2012, which was included within the Company’s interim results to 30 June 2012 and notified on 27 September 2012.
Frontera Resources Corporation
Vice President, Investor Relations and Corporate Communications
Nominated Adviser and Joint Broker:
Matt Goode/Christopher 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.