Frontera Makes Headway in Third Quarter at Georgia's Block 12
Frontera has announced results for the quarterly period ended September 30, 2008 and provided a review and update of its operations in Block 12, Georgia.
- Revenues for the first nine months of 2008 were $2.9 million, which is $1.0 million higher than the same period in 2007. To date, revenues in 2008 are $4.9 million, which is $3.0 million higher than the comparable period in 2007 as a crude oil sale of $2.0 million was completed subsequent to quarter end.
- Results for the quarter ended September 30, 2008 reflect a net loss of $10.4 million, or $0.14 per share on a fully-diluted basis, in line with the early stage nature of the company's asset portfolio and expenditures required to evaluate the company's undeveloped fields and exploration opportunities.
- Strong working capital position at September 30, 2008.
- Favorable ruling received in arbitration with GAC Energy Company and GAC International Holdings Ltd.
- Russia's invasion of Georgia in August and current international financial and oil markets downturn presented unanticipated business environment challenges.
Shallow Fields Production Unit
- Commenced development drilling program at the Mtsare Khevi Field in August, with 10 wells completed to date and an 11th currently underway associated with a rolling 20-well drilling campaign. Development drilling at Mtsare Khevi Field has been very successful thus far, with 100 percent of the wells finding and testing hydrocarbons. Since the start of the drilling campaign, eight wells have come on stream as oil wells and two have found gas.
- Commenced development drilling operations at the Nazarlebi Field and Patara Shiraki Field in July, with 20 wells completed to date.
- Continued production operations at Mirzaani Field and completed technical evaluation program for new development drilling expected to commence prior to year end.
- Achieved a 110 percent increase in production to date this year as a result of ongoing development operations. The unit has generated revenues of $1.3 million since mid-year.
Taribani Field Unit
- Continued analysis of ongoing production results from frac-stimulation completions associated with initial Zone 9 development wells. Production data has provided the basis for optimization of future frac completion designs in Zone 9 and provided technical basis for re-design of future development wells to also include completion in Zones 14/15. Multi-zone completions within a single wellbore will increase cost effectiveness and accelerate value creation in ongoing 20-well development program at the Taribani Field.
- Delayed drilling of the next planned development well to early 2009 in favor of incorporating optimized engineering and frac completion designs, in addition to monitoring changing industry cost structure associated with current business climate.
- Achieved a substantial increase in production to date this year as a result of ongoing development operations. The unit has generated revenues of $0.7 million since mid-year.
Basin Edge Play Unit
- Completed depth migration of 80 square kilometer 3D seismic survey associated with the "C" Prospect. Results have revealed that previous structural interpretation remains intact and provided an enhanced understanding of the prospectivity associated with this large prospect in anticipation of future drilling operations.
- Continued efforts to secure a technically appropriate rig for completion of currently suspended drilling operations at the "C" Prospect's Lloyd #1 well with a focus on successfully reaching primary Cretaceous objectives within the prospect. Amidst a changing market environment for oilfield services and equipment, current plans are targeting resumption of drilling during the second quarter of 2009.
Steve C. Nicandros, Chairman and Chief Executive Officer, commented, "Despite unanticipated challenges presented by Russia's invasion of Georgia in August, Frontera's operations since mid-year have marked a continued period of progress and growth.
"Development drilling operations within the Shallow Fields Production Unit have successfully provided the basis for an increasing oil production profile. This work has also defined opportunity for developments that are generally larger than originally anticipated and has revealed the new possibility to add gas reservoir development to our commercialization agenda. As a result, we are optimistic that this business unit will continue to add important near-term value to our company.
"At the Taribani Field Unit, analysis of production and reservoir performance data over the past several months has permitted us to reach important new milestones in evolving the technical efficiency and resulting commercial strength of our ongoing development program. Based on investments to date related to frac-stimulation of Zone 9 reservoirs, we now understand that we can improve the efficiency of future fracs as well as add additional reservoirs to individual frac-stimulation well completions.
"These advancements now provide us with confidence in our ability to frac and produce Zones 9, 14 and 15 from a single wellbore in future development wells, thereby allowing us to more cost effectively accelerate development of this large field. While recent geopolitical events in Georgia contributed to a delay in commencing planned drilling operations at the Taribani South #1 well in September, this provided an opportunity to incorporate ongoing technical analysis into current development plans such that we have altered our planned drilling schedule in favor of implementing a more efficient program.
"At the Basin Edge Play Unit, our ongoing technical analysis of results from recent drilling operations and associated depth migration of extensive geophysical data continues to enhance our view of the giant reserve potential that this business unit contains. However, economic conditions presented a tight and expensive service sector climate throughout the third quarter of this year, providing a challenging atmosphere for the procurement of equipment necessary to complete our exploration drilling plans at the Lloyd #1 well. As market conditions improve, our desire is to return to drilling this important prospect during the second quarter of 2009.
"Our rigorous approach to securing liquidity has ensured a strong working capital position as we continue our work programs. Nevertheless, we recognize that recent turbulence in the international financial markets and the dramatic decline in oil prices may present challenges to execution of our future funding strategy, in particular through project financing and internally generated cash flow. While we continue to pursue available sources of capital for continued growth, we are cautious in the management of our discretionary work programs in consideration of the possibility that financial markets may remain sluggish and that lower oil prices may also persist for the near term.
"Overall, amidst the current international economic environment, we remain encouraged with respect to the results we have seen from operations in each of our business units. Accordingly, as we move forward to the end of this year and into 2009, we will continue to responsibly manage our growth with a focus on increasing near-term production from development drilling while ensuring that associated costs are in line with current market conditions."
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