Frontera announced that on October 24, 2008, it had received a favorable ruling in its arbitration with GAC Energy Company and GAC International Holdings Ltd. The arbitrator awarded GAC no damages in its claim against Frontera and Frontera Resources Georgia Corporation, and directed GAC to pay Frontera's arbitration costs of approximately $85,000. The arbitration was conducted through the International Center for Dispute Resolution of the American Arbitration Association in Houston.
This matter involved a dispute over GAC's performance under a 2002 farmout agreement for an ownership interest in Frontera's Block 12 license area in Georgia. Frontera conditionally assigned GAC an interest in Block 12 under the farmout agreement, subject to completion of certain financial and work obligations. However, GAC ultimately defaulted on its obligations prompting a reassignment of its conditional interest in 2004. GAC initiated this arbitration in 2007 contending that it earned a portion of the defaulted interest.
The arbitrator found that GAC failed to complete its obligations under the farmout agreement and rejected GAC's claims for either an interest in Block 12 or $19 million in restitution. The arbitrator also denied GAC's claim for a partial ownership interest under the doctrine of "substantial performance." The arbitration, which is binding on the parties, resolves all claims and counterclaims between Frontera and GAC with respect to the farm-out agreement.
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