New Discovery Increases Size of Gas Potential at Mtsare Khevi Field within Shallow Fields Production Unit in Georgia
NEW DISCOVERY INCREASES SIZE OF GAS POTENTIAL AT MTSARE KHEVI FIELD WITHIN SHALLOW FIELDS PRODUCTION UNIT IN GEORGIA
Frontera Resources Corporation (London Stock Exchange, AIM Market: FRR), the oil and gas exploration and production company with assets in the country of Georgia, today announces an update of development drilling operations, including the discovery of extensive new gas resources in the undeveloped northwestern portion of the Mtsare Khevi Field within its Shallow Fields Production Unit, Block 12.
Testing operations are currently underway at the recently announced Mtsare Khevi #32 well that was drilled in the undeveloped northwestern portion of the field, approximately 4 km away from previously drilled well #31. After drilling to a planned depth of 370 meters, log analysis indicated that approximately 33 meters of gas bearing net pay were penetrated among the known Zones I, II and III within the field. Testing has begun on a 14 meter section of the lowest portion of the identified pay zones, Zone I, and delivered a rate of approximately 12,500 cubic meters of gas per day (441 mcf per day) on a 9 mm choke and 19,000 cubic meters (671 mcf per day) on a 16 mm choke. It is estimated that the absolute open flow, AOF, for Zone 1 based on these tests is approximately 24,000 cubic meters per day (847 mcf/d). Over the next week, testing operations will progress up hole to Zones II and III in order to determine total gas deliverability from the well.
Based on results observed to date, Frontera believes that the #32 well has successfully served to expand the size of the Mtsare Khevi field’s gas potential by as much as 5 times the previously identified recoverable gas estimates associated with the Company’s historical work in the field. Situated less than 10 km from the national gas distribution pipeline grid, the new discovery will serve to accelerate the addition of new infrastructure to commence gas sales. Construction engineering plans are currently under review in order to determine the most efficient timeline for installation.
In other operations within the field, the recently drilled Mtsare Khevi #31 well has been placed on production at an expected rate of approximately 10 bbls of oil per day (b/d) from a 7 meter reservoir section. The well penetrated approximately 22 meters of net pay, including 6 meters of gas bearing reservoir sands.
Drilling operations will now continue at the #41 location which is the third of a planned 20 well program over the next 24 months designed to exploit multiple Upper Pliocene sandstone reservoirs situated at a depth of approximately 300 meters.
The Mtsare Khevi Field, which Frontera operates with 100% interest, is located in the western portion of the Shallow Fields Production Unit. In their July 2010 report for the Company, the independent engineering firm of Netherland, Sewell & Associates (“NSA”) places a “Best Estimate” for gross original gas-in-place for the Mtsare Khevi Field of 2.6 billion cubic feet, with a “low”-to-“high” range of 2.1–3.1 billion cubic feet; and a “Best Estimate” for associated gross contingent and unrisked prospective resources of 1.5 billion cubic feet, with “low”-to-“high” range of 1.2-1.9 billion cubic feet. Frontera’s new internal estimates reflect additional resource potential along the northwest trend of the field’s fault block which the Company believes have now been confirmed by well #32. NSA will be asked to evaluate Frontera’s assessments for this area once appraisal drilling has been completed during the current campaign.
For oil, NSA places a “Best Estimate” for gross original oil-in-place for the Mtsare Khevi Field of 14.9 million barrels, with a “low”-to-“high” range of 11.3–19.7 million barrels; and a “Best Estimate” for associated recoverable gross contingent and unrisked prospective oil resources of 2.1 million barrels, with a “low”-to-“high” range of 1.4-3.2 million barrels. This assessment is generally consistent with Frontera’s internal estimates.
Steve C. Nicandros, Chairman and Chief Executive Officer, commented:
“The successful results achieved by the #32 well are extremely significant in that they not only serve to expand and enhance the value of the Mtsare Khevi field’s gas resources, but also confirm the presence of gas in the western portion of Block 12 which may lead to further upside prospectivity. This confirmation provides important technical support for gas exploration efforts related to other fields situated within the Shallow Fields Production Unit as well as our nearby Shale Gas Play Unit where we believe large gas resources are contained in unconventional reservoirs associated with the Maykop shales.
Overall, the success achieved from recent drilling has significantly enhanced the value of the Mtsare Khevi field and will now set us on a course to accelerate gas sales into the local market where prices range from $4 to $6 per mcf. When these gas sales commence, the increase in production will provide Frontera with the additional cashflow to significantly enhance the profile of the Company and contribute to its target of reaching 5,000b/d by the end of 2013.”
Frontera Resources Corporation
Vice President, Investor Relations and Corporate Communications
Strand Hanson Limited
James Harris / Andrew Emmott / Paul Cocker / Liam Buswell
+44 (0)20 7409 3494
Arbuthnot Securities Limited
Richard Johnson / Adam Lloyd
+44 (0)20 7012 2000
Old Park Lane Capital Plc
Michael Parnes / Luca Tenuta
+44 (0)20 7493 8188
Cornhill Capital Limited
Nick Bealer/Stefan Olivier
+44 (0)20 7012 2000
Tim Thompson / Ben Romney
+44 (0)20 7466 5000
Notes to Editors:
About the Shallow Fields Production Unit
The Shallow Fields Production Unit is located in the central portion of Block 12 and represents what the Company believes to be an extensive trend of low-cost, low-risk oil and gas resources. The unit contains a number of known oil fields; Mirzaani, Mtsare Khevi, Nazarlebi and Patara Shiraki, representing undeveloped or under-developed fields that have additional associated exploitation potential. The unit also contains an inventory of “look-alike” exploration prospects, the Kakabeti, Lambalo, Mkralihevi, Mlashiskhevi-Oleskhevi and Tsitsmatiani prospects, each of which contains Soviet-era wells that had hydrocarbon shows while drilling, but were never placed on production or adequately appraised. Reservoir objectives are the well-known, regional clastic reservoirs of Pliocene and Miocene age, situated at depths from 10 meters to 1,500 meters. For more information regarding the Shallow Fields Production Unit, please visit the company’s website at:
About Frontera Resources Corporation
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 around the world. 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.