Frontera Production from Shallow Fields Up 30%

Shallow Fields Production Unit
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Frontera Resources Corporation has announced an update of operations at its Shallow Fields Production Unit, Block 12, Georgia.

Since the start of the second quarter of 2008, average daily production increased approximately 30% when compared to the first quarter of 2008, with peak production during the month of July ranging from 95 bbls per day to 130 bbls per day from the Unit. This increase is primarily attributed to implementation of pilot projects that have formed the basis for aggressive new drilling campaigns that are now being implemented across the four undeveloped or underdeveloped oil fields that comprise the Shallow Fields Production Unit. As previously reported, oil sales during the second quarter resulted in $2.6 million in revenue from this business unit, with current produced oil inventories expected to generate comparatively larger revenues during the third quarter of 2008.

Mirzaani Field: Throughout the second quarter of 2008, production operations have continued from multiple oil and gas bearing reservoirs situated within the Shiraki formation at depths of 400 meters to 1,200 meters.
In June, a pilot project was completed to re-enter five existing wells within the field to conduct radial drilling operations. A specialized drilling unit was mobilized to the Mirzaani Field in order to drill multi-lateral extensions from five wells in order to determine if this technique might have broader application throughout the field's reservoirs. Production testing is underway and early results have shown an increase in well performance. If this increase continues, the pilot project will establish the basis for application of this completion technique in not only workovers of existing wells throughout the Mirzaani Field, but in similar reservoirs across the Shallow Fields Production Unit when new wells are completed.

The reservoir engineering firm of Netherland, Sewell & Associates, Frontera's independent reserve engineers, has previously estimated the reserves associated with current production to be 282,000 barrels of proved producing reserves, 97,000 barrels of probable reserves and 64,000 barrels of possible reserves. Overall, Frontera estimates the remaining recoverable reserves of all categories in the Mirzaani Field to be approximately 1.5 million barrels, including the 0.443 million barrels covered by Netherland Sewell's previous estimates, taking into account undeveloped reserves beyond existing well bores. During the second quarter of 2008, work commenced to update reserve estimates.

Mtsare Khevi Field: During the second quarter of 2008, a multi-well workover program was completed at the undeveloped Mtsare Khevi Field, targeting oil and gas bearing reservoirs within the Akchagil formation situated at depths of approximately 400 meters. Production results obtained from this program have confirmed the basis for commencement of a new 60-well development program. Drilling of the first new well, the MK#12 well, has commenced. Dedicated rigs and equipment from within Georgia are being utilized to undertake this program with an objective of drilling as many as 20 wells this year.

The Mtsare Khevi Field is located in the eastern portion of Block 12 with multiple objective reservoirs situated at depths between 200 meters and 1,100 meters. It was discovered and partially delineated with multiple exploration-delineation wells from 1989 to 1994, but never developed and produced. After completing a field study in 2007 that indicated this field potentially contains approximately 5 million barrels of recoverable oil reserves, Frontera designed a plan to bring reservoirs from the Akchagil formation into production. In addition to the shallow Akchagil formation reservoirs, work has also recently commenced on evaluation of known oil in Miocene age sandstone intervals between 400 meters and 1,500 meters that have also previously tested oil and gas from existing wells in the Mtsare Khevi Field.

Nazarlebi Field and Patara Shiraki Field: During the first quarter of 2008, a pilot program of ten wells was drilled to depths of approximately 100 meters in order to specifically target and produce known oil-bearing reservoirs in the Shiraki formation lying updip from the highest known perforations in existing wells. Throughout the second quarter of this year, production from these wells was observed and results provided the basis to proceed with the commencement of an extensive development program. Field studies and the presence of existing natural oil seeps have revealed the presence of extensive undeveloped oil potential at these shallow depths of as much as 1 million barrels of recoverable oil.

In late July, development drilling operations commenced with an objective of drilling as many as 90 wells prior to the end of 2008. Several rigs have been mobilized to undertake this program and three wells have already been completed with continuous drilling operations underway. This work represents the start of an extensive, low-cost development program in these two fields in order to increase near-term production and cash flow, and Frontera believes there are potentially hundreds of locations that can be drilled.

During 2007, field studies concluded that significant undeveloped reserve potential of as much as 5 million barrels of recoverable reserves exists in oil bearing reservoirs situated at depths from 10 meters to 1,200 meters within the Shiraki formation at the Nazarlebi and Patara Shiraki Fields. These fields are situated adjacent to one another in Block 12.

Steve C. Nicandros, Chairman and Chief Executive Officer, commented, "Our work within the Shallow Fields Production Unit has been very encouraging and we are pleased that results from our various pilot projects during the second quarter have provided the basis for the commencement of aggressive near-term production increases and reserve additions. As drilling operations now continue to ramp up, we expect that the rise in production and associated revenue that we have recently experienced from this business unit will continue to build significant value throughout the second half of this year and beyond."

Frontera's 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 undeveloped oil and gas reserves. Containing four discovered yet undeveloped or underdeveloped fields, with associated exploration potential, these fields are situated in Pliocene age horizons at depths from 10 meters to 1,500 meters.


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