Frontera Resources has entered into placing and subscription agreements to raise approximately US $6.0 million through a private placement of shares of common stock and warrants. The resulting net proceeds will be used to fund the company's ongoing oil and gas development programs within its Shallow Fields Production Unit, Block 12, located in the country of Georgia.
All of the net proceeds of the placing will go towards the next phase of continued investment in work programs that are aimed at increasing oil and gas production and associated reserve bookings from the Mirzaani and Mtsare Khevi fields, two of four undeveloped fields within the Shallow Fields Production Unit. New drilling operations are scheduled to begin in the third quarter of 2009 and are planned to be completed by year end. Frontera believes that successful completion of these work programs will increase daily production to as much as approximately 1,000 barrels of oil equivalent per day.
At the Mtsare Khevi Field, a portion of the proceeds will go towards drilling three new development wells in continuation of an initial drilling campaign that commenced during the third quarter of 2008. This program resulted in the drilling of 14 new wells in the field that initiated oil production and established the basis for new gas production from reservoirs situated between approximately 200 meters and 350 meters in depth. Accordingly, the Company now plans to invest in the construction of new infrastructure to produce and sell gas from the field into the local Georgian market.
Proceeds will also fund the continuation of new drilling operations at the Mirzaani Field. Two new wells are planned in follow up to the recent drilling of the Mirzaani #2 well that resulted in the discovery of a new, undeveloped extension of the Mirzaani Field known as Mirzaani Field Northwest and also established the basis for developing horizons that remain undeveloped below the Mirzaani Field proper. The new wells will continue to target reservoirs situated between 800 meters and 1,500 meters in depth. In addition, new investment is planned to add production from a workover program of existing wells within the Mirzaani Field.
Based on analysis of programs to date at both fields, Frontera estimates the two fields contain approximately 50 million barrels of prospective resources. New reserve reports are expected to be completed following the planned work program.
Steve C. Nicandros, Chairman and Chief Executive Officer, commented, "We are very pleased with this addition of new capital in support of our company's ongoing efforts. The planned use of these proceeds will permit us to continue to advance work at the Shallow Fields Production Unit where anticipated results are expected to provide us with increased cash flow generation going into 2010. Underpinned by cost cutting initiatives that have been implemented since the beginning of this year and remain ongoing, I am encouraged by the overall prospects for meaningful value realization and growth in the year ahead.
"In addition, while we have chosen to prioritize our near term efforts in favor of increasing cost effective production from our Shallow Fields Production Unit in order to establish a strong foundation for our company, we will simultaneously continue to pursue strategies designed to allow us to bring the Taribani Field Unit into commercial production and to fully evaluate the significant exploration potential that we have identified at the Basin Edge 'B' and 'C' Prospects."
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