Frontera Reports Resource Estimates for Georgia Block

Frontera provided an operations update as well as an update of oil and gas resources associated with its Shallow Fields Production Unit, located within the Block 12 license area in the country of Georgia.

Netherland, Sewell & Associates ("NSA") has finalized the results of its estimate of contingent and prospective resources associated with fields and prospects situated within the Shallow Fields Production Unit as of July 1, 2010 in accordance with standards established by the Society of Petroleum Engineers.

Highlights of the report include the following:

  • Oil:
    • Mirzaani, Mtsare Khevi, Nazarlebi and Patara Shiraki Fields*: "Best Estimate" for gross (100 percent) original oil-in-place of 626.2 million barrels, with a "low"-to-"high" range of 397.4-991.9 million barrels; and "Best Estimate" for associated recoverable gross contingent and unrisked prospective oil resources of 52.1 million barrels, with a "low"-to-"high" range of 24.9-101.3 million barrels. (*Includes Mirzaani Northwest Extension and Mtsare Khevi Prospects.)
    • Kakabeti, Lambalo, Mkralihevi, Mlashiskhevi-Oleskhevi and Tsitsmatiani Prospects: "Best Estimate" for gross (100 percent) original oil-in-place of 91.9 million barrels, with a "low"-to-"high" range of 57.7-147.7 million barrels; and "Best Estimate" for associated recoverable unrisked prospective oil resources of 8.7 million barrels, with a "low"-to-"high" range of 4.8-16.2 million barrels.
  • Gas:
    • Mtsare Khevi Field**: "Best Estimate" for gross (100 percent) original gas-in-place of 2.6 billion cubic feet, with a "low"-to-"high" range of 2.1-3.1 billion cubic feet; and "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. (**Includes Mtsare Khevi Prospect.)

Shallow Fields Production Unit

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 oil and gas resources. Containing the Mirzaani Field, Mtsare Khevi Field, Nazarlebi Field, and Patara Shiraki Field, these assets represent discovered yet undeveloped or underdeveloped fields that have additional associated exploitation potential. In addition, this unit contains an inventory of look-alike prospects known as the Kakabeti, Lambalo, Mkralihevi, Mlashiskhevi-Oleskhevi and Tsitsmatiani prospects. Each of these prospects contains Soviet-era wells that demonstrated hydrocarbon shows while drilling but were never placed on production or adequately appraised. Objectives are considered to be traditional, well-known reservoirs of Pliocene and Miocene age that are situated at depths from 10 meters to 1,500 meters.

Mirzaani Field

Schlumberger has been contracted to provide services for a multi-zone frac completion at the #5 well. Frac operations have now commenced and are on-schedule to be completed in late September 2010.

Investments made within the past year have resulted in the discovery and confirmation of large undeveloped or underdeveloped portions of the field. In addition, operations resulted in the acquisition of important new technical information related to the reservoirs associated with the large undeveloped area of the Mirzaani Field. While it was not originally expected that frac completions would be necessary to bring the field into commercial production, analysis indicates that fracing is the key to maximizing production rates and enhancing the economic value of the field. In this context, small-scale, internally designed test fracs were successfully applied to two of the three wells to further validate this premise ahead of contracting Schlumberger to apply conventional large-scale fracs.

Discovered in 1932, the Mirzaani Field has historically produced approximately 7 million barrels of oil, but contains extensive undeveloped and underdeveloped areas. The Mirzaani #1, #2 and #5 wells are the newest wells to be drilled in the field since the Soviet-era. In 2006, Frontera acquired approximately 100 kilometers of new 2D seismic data over the field area as part of an effort to re-map and identify new potential associated with the field.

The new independent assessment by NSA places a "Best Estimate" for gross original oil-in-place for the Mirzaani Field and Mirzaani Northwest Extension of 541.7 million barrels, with a "low"-to-"high" range of 343.8-857.3 million barrels; and a "Best Estimate" for associated recoverable gross contingent and unrisked prospective oil resources of 43.8 million barrels, with a "low"-to-"high" range of 20.5-86.1 million barrels. This assessment is consistent with Frontera's internal estimates.

Evaluation and production testing have continued at the Mirzaani Field, focusing on preparation for future frac completions at the Mirzaani #1, Mirzaani #2 and Mirzaani #5 wells. Frontera's analysis has continued to underscore the potential commerciality that can be achieved from frac completions of wells within the underdeveloped portions of the field. The first frac completion is expected in late September on the Mirzaani #5 well.

Mtsare Khevi Field

The Mtsare Khevi Field is located in the western portion of Block 12 with multiple objective reservoirs situated at depths between 200 meters and 1,100 meters. The field was discovered, nominally produced and partially delineated with multiple exploration wells from 1989 to 1994, but never developed. After completing a field study in 2007, Frontera designed a plan to bring the shallow reservoirs from the Akchagil formation into production.

The new independent assessment by 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 for the Akchagil formation.

For gas, 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 internal estimates reflect additional resource potential along the northwest trend of the fault block, which NSA was not asked to evaluate.

Steve C. Nicandros, Chairman and Chief Executive Officer, commented, "Netherland, Sewell & Associates' recent assessment of the potential associated with our Shallow Fields Production Unit represents a new and important validation of the significant value that our historical investment programs have uncovered to date. We look forward to updating the reserves category of resources associated with the Mirzaani Field and Mtsare Khevi Field as new operations progress and as production increases from the Shallow Fields Production Unit."

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